Is DexCom (DXCM) Setting Up for a Breakout?

Dexcom Inc. (DXCM) designs and commercializes continuous glucose monitoring systems for diabetics. CGM systems serve as an alternative to the traditional blood glucose meter process, and the company is evolving its CGM systems to include the disposable sensor and the durable receiver…

Dexcom Inc. (DXCM) recently reported a strong third quarter where both earnings and revenues beat expectations. This was driven by solid revenue from the Sensor segment. DXCM also saw revenue growth from both domestic and international sales. In fact, the company’s international foothold bodes well for future growth.

DXCM has a current ratio of 5.0, which indicates it has more than enough liquidity for short-term obligations. This has led to a Quality Grade of B in our POWR Ratings system. The company has also shown strong earnings and revenue growth.

Over the past three years sales have grown an average of 36.3% per year, while earnings jumped an average of 123.5% per year. However, the stock looks overvalued with a forward P/E of 172.41. DXCM has been showing bullish momentum since mid-May as shown in the chart below.

Take a look at the 1-year chart of DXCM with the added notations…

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