Quite expensively valued
At a current trading price of $17 per share, DexCom is worth nearly $1.2 billion on the market. The market values DexCom at 10.84 times trailing revenue. As DexCom generated negative EBITDA, the EV/EBITDA valuation is not valid for this company. Compared to its peers including Medtronic, Inc. (NYSE:MDT) and Boston Scientific Corporation (NYSE:BSX), DexCom is the smallest company among the three. Boston Scientific, at $8 per share, has a total market cap of around $10.3 billion. It is valued at a much cheaper valuation, at 1.4 times its revenue and 8.7 times EV/EBITDA. Medtronic is the biggest company, with $46.6 billion in total market cap. At around $46 per share, Medtronic is valued at 2.85 times sales and 10.14 times EV/EBITDA.
While DexCom generated operating losses, both Medtronic, Inc. (NYSE:MDT) and Boston Scientific Corporation (NYSE:BSX) delivered decent operating profits. Medtronic is the most profitable company, with a 28.24% operating margin whereas the operating margin of Boston Scientific is 13.17%. Among the three, only Medtronic pays shareholders dividends with a yield of 2.2%. Both DexCom and Boston Specific do not pay any dividends.
Foolish bottom line
In the long run, DexCom would continue to grow along with the increasing number of diabetes patients as diabetes patients could benefit from the company’s glucose monitor product. However, due to the extreme high valuation of nearly 11 times sales, I am personally not excited about DexCom despite its recent huge insider buy.
The article Insider Buys in This Fast Growing but Loss Generating Company originally appeared on Fool.com and is written by Anh HOANG.
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