Will Rising Returns on Invested Capital Change DexCom's (DXCM) Global Growth Narrative?

• In the past week, DexCom reported significant growth in return on capital employed, reaching 17% over five years, alongside a 29% increase in its capital base.
• This operational improvement suggests the company is earning more from its investments and reflects the impact of previous capital expansion efforts.
• We'll explore how these stronger returns on invested capital could influence DexCom's investment narrative, particularly given its global growth and reimbursement expansions.

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DexCom Investment Narrative Recap

To be a DexCom shareholder, you need to have conviction in the company's ability to expand its addressable market and sustain innovation, particularly in the competitive CGM space. The recent uptick in return on capital employed, paired with meaningful capital base growth, is a constructive sign, but it does not materially shift the most important short-term catalyst, reimbursement expansion for type 2 patients, or alleviate the largest risk, which is the prospect of CMS-driven pricing pressure from 2027.

Among DexCom’s recent announcements, the Ontario Drug Benefit program’s reimbursement of the G7 CGM is closely tied to global reimbursement trends. This development is directly relevant to the core investment catalyst, as it demonstrates real-world progress in unlocking access to new patient pools and regions, underpinning the path to sustained revenue growth even as competition remains fierce.

However, in contrast to these positive signals, there remains a potential risk on the horizon that investors should be aware of if competitive bidding for CGM devices proceeds...

Read the full narrative on DexCom (it's free!)

DexCom's outlook anticipates $6.5 billion in revenue and $1.4 billion in earnings by 2028. This scenario relies on 14.8% annual revenue growth and an earnings increase of $828.5 million from the current $571.5 million.

Uncover how DexCom's forecasts yield a $102.08 fair value, a 24% upside to its current price.

Exploring Other Perspectives

Three Simply Wall St Community fair value views for DexCom range from US$98 to US$117, showing a US$19 difference in expectations. Many see expanding reimbursement as critical to future performance, but interpretation varies widely, explore several perspectives to inform your own outlook.

Explore 3 other fair value estimates on DexCom - why the stock might be worth just $98.00!

Build Your Own DexCom Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your DexCom research is our analysis highlighting 3 key rewards that could impact your investment decision.
• Our free DexCom research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate DexCom's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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