Monday morning’s trading session was not a pleasant one for DexCom (DXCM) or its investors. Shares of the medical device manufacturing company fell 8% by 12PM EST with no signs of slowing down. But what happened to cause this slip?
It wasn’t necessarily anything DexCom did or didn’t do. Rather, close competitor Abbott Laboratories gained FDA clearance to pair its body-worn glucose monitors with automated insulin pumps.
This clearance was a huge competitive advantage that DexCom has over Abbott. Previously, DexCom was the only company that could offer this. But with today’s news, it appears the two companies are on a level playing field. If anything, Abbot now has the advantage in this segment as the cost of their solution is cheaper than DexCom’s.
The fear for DexCom and the company’s shareholders is that Abbott’s Libre device could gain preferential formulary placement from here on out because of all this. This would have a dramatic effect on patient out-of-pocket payments and lead to a huge gain in the Type 2 diabetes market for Abbott, cutting into the volume that has gotten DexCom to where they are today.
Now, if you’re holding DexCom in your portfolio, today’s news and the loss that came with it is undoubtedly worrisome. But is it time to hit the panic button – or will the company be able to persevere and find a new competitive advantage? After all, DXCM closed last week at a 10% gain before falling back to earth in today’s trading session.
In looking at the stock through VectorVest’s stock analyzing software, there are three insights you can use to help make an informed decision on your next move. Here’s what you need to know…
Despite Poor Upside Potential, DXCM Has Good Safety & Fair Timing
The VectorVest system tells you everything you need to know about a stock in three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Together, these can help you increase your success rate with less work - how nice would that be?
Interpreting these ratings is quick and easy, as they sit on a scale of 0.00-2.00. 1.00 is the average. But the best part is that based on these three ratings, VectorVest can give you a clear buy, sell, or hold recommendation. Here’s what you need to know about DXCM:
- Poor Upside Potential: The RV rating assesses a company’s long-term price appreciation potential (three years out) compared to AAA corporate bond rates and risk. And right now, the RV rating of 0.62 is poor. Moreover, the stock is far overvalued at the current price. Its current value is just $21.53.
- Good Safety: In terms of risk, DXCM has good safety with an RS rating of 1.16. This is calculated based on the company’s financial consistency and predictability, debt-to-equity ratio, and business longevity.
- Fair Timing: Despite the nearly 8% loss in Monday’s trading session, DXCM still has fair timing - as a strong price trend was in the midst of forming just last Friday. The RT rating of 0.91 is just below the average. This is calculated based on the direction, dynamics, and magnitude of the stock’s price movement.
These three ratings contribute to an overall VST rating of 0.94 - which is fair but slightly below the average. Does that mean it’s time to sell - or should you hold out a bit longer to see what happens in the coming days or weeks? Don’t play the guessing game or make a decision based on emotion. Get a clear answer on your next move with a free stock analysis today.
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VectorVest advocates buying safe, undervalued stocks, rising in price. Right now, DXCM has poor upside potential - but good safety and fair timing.
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