Is DexCom Trading Below Fair Value After a 41.8% Three Year Drop?

Thinking about buying or holding DexCom stock? You’re not alone. Whether you’re a long-term investor or just looking for a timely healthcare pick, DexCom probably caught your attention for its role in continuous glucose monitoring, but its recent price moves might have you wondering if now is the best time to act. Shares closed at $69.23 recently, and the ride has been anything but smooth. In the past seven days, the stock slipped by 0.7%, recovering 3.2% over the last month. Yet DexCom still sits down 11.8% year-to-date and is trailing by 4.2% over the past year. The longer-term view is even bumpier, with a drop of 41.8% over three years and down 16.5% across five years.

What is driving these ups and downs? While major headlines have been rare, lingering discussions about innovation in diabetes technology and market competition continue to shape how investors assess DexCom's growth prospects and risk. There is also ongoing buzz about the company’s push to expand its device access, signaling determination to carve out more market share. That optimism can be seen in the valuation score. DexCom hits 3 out of 6 major under-valuation checks, hinting there may be opportunities for savvy investors but not without risk.

So how do all these threads come together in DexCom's valuation? Up next, we will cut through the noise and break down how DexCom stacks up through the lens of key valuation approaches. And, stick around because later we will reveal a perspective that might offer an even sharper read on what DexCom's really worth.

Why DexCom is lagging behind its peers

Approach 1: DexCom Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by estimating all of DexCom's future cash flows and then discounting them back to today's value, providing an estimate of what the business is truly worth. This method digs beneath the surface and focuses on the company's unique ability to generate cash over time, rather than relying on current market sentiment.

DexCom has reported a Last Twelve Months Free Cash Flow (FCF) of $631 million. Analyst estimates project steady growth, with FCF expected to reach around $1.9 billion in 2029. While analyst estimates extend five years forward, projections beyond that are extrapolated based on growth trends and industry expectations. These future cash flows are discounted to account for risk and time value, ensuring the present value reflects realistic returns for shareholders.

Based on this two-stage DCF approach, DexCom's estimated intrinsic value is $115.43 per share. With the current market price at $69.23, the DCF model indicates the stock is trading at a 40% discount to its fair value. This substantial gap suggests that DexCom could be significantly undervalued from a long-term cash flow perspective.

Story Continues

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DexCom.DXCM Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests DexCom is undervalued by 40.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: DexCom Price vs Earnings

The price-to-earnings (PE) ratio is widely used for valuing profitable companies because it directly links a company’s current share price to its earnings, helping investors gauge how much they are paying for each dollar of profit. For profitable businesses like DexCom, the PE ratio cuts through accounting quirks and highlights investor sentiment about growth prospects and underlying risk.

That being said, what counts as a “normal” or “fair” PE ratio varies depending on earnings growth and the risks facing a company. Generally, higher growth rates or lower risks justify a higher PE ratio, while slower growth or greater uncertainty push the ratio lower. Comparing DexCom to its industry benchmarks shows some differences. DexCom trades at 47.5x, which is higher than the Medical Equipment industry average (28.4x) and just above the peer group average (44.1x). This premium suggests the market has optimistic expectations for future growth, but also that some risk is priced in.

Instead of relying only on simple averages, Simply Wall St uses a proprietary “Fair Ratio” to capture all the nuances; it considers DexCom’s earnings growth outlook, profit margin, market cap, specific risks, and how it stacks up within its sector. Here, the Fair Ratio for DexCom is 38.3x. Since DexCom’s actual PE ratio of 47.5x is well above this fair value benchmark, the stock appears overvalued relative to its underlying fundamentals, even after accounting for its strengths and position within the industry.

Result: OVERVALUEDNasdaqGS:DXCM PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DexCom Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives allow you to craft a clear story about DexCom by tying together your view of its future revenue, earnings, and margins with what you believe is a fair value, all in one intuitive forecast. With Narratives, you connect the dots between what is driving the business and the financial outcomes you expect, making your investment reasoning transparent and actionable. This tool is available right on Simply Wall St’s Community page, trusted by millions of investors, and is designed to adapt with new information such as breaking news or earnings releases, ensuring your perspective is always up to date. Narratives empower you to make smarter investment decisions by always comparing your own fair value estimate against the current market price. For example, some DexCom investors are optimistic, seeing opportunities from insurance reimbursement and digital health integration. They set a fair value around $115 per share, while more cautious users focus on competitive and reimbursement headwinds and assign a fair value as low as $83. Ultimately, Narratives help you cut through noise and turn your investment thesis into a data-driven, well-informed decision.

Do you think there's more to the story for DexCom? Create your own Narrative to let the Community know!NasdaqGS:DXCM Community Fair Values as at Oct 2025

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.

Companies discussed in this article include DXCM.

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