Dexcom

Methodology

Dexcom's continuous glucose monitoring business generates predictable recurring revenue from consumable sensors, making earnings increasingly reliable as profitability scales. The razor-and-blade model creates strong customer retention and revenue visibility. Fair value works well when accounting for sustained double-digit earnings growth as international markets expand and Type 2 diabetes adoption accelerates.

Methodology

Dexcom typically trades at PEG ratios between 2.0-4.0x, reflecting premium valuations for its CGM market leadership and large growth runway in diabetes management. The company's technological advantages and clinical outcomes data support high switching costs. PEG appears expensive but reflects sustainable growth from expanding CGM adoption beyond intensive insulin users.

Methodology

Dexcom doesn't pay dividends and reinvests all cash flow into R&D, manufacturing capacity, and international expansion to capture the global CGM opportunity. Management focuses on maximizing long-term market penetration over near-term cash returns. Total return depends entirely on earnings compounding as CGM becomes standard of care for diabetes management.