It is only natural that many investors, especially those new to the game, would rather buy âhotâ stocks with a good story, even if those companies are losing money. And in their study entitled Who is the prey of the Wolf of Wall Street? ‘ Leuz and. Al. Found that it is “quite common” for investors to lose money by buying into “pump and dump” programs.
In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like DexCom (NASDAQ: DXCM). While that doesn’t make stocks worth buying at all costs, you can’t deny that successful capitalism ultimately requires profits. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.
See our latest review for DexCom
How fast is DexCom increasing its earnings per share?
Over the past three years, DexCom’s earnings per share have taken off like a rocket; fast, and from a low base. So the real growth rate doesn’t tell us much. As a result, I’ll zoom in on last year’s growth instead. Like a firecracker in the night sky, DexCom’s EPS has fallen from US $ 2.22 to US $ 5.48 in the past year. 147% annual growth is certainly a sight to behold. The best scenario? That the company has reached a real inflection point.
I like to see revenue growth as an indication that growth is sustainable, and I look for a high profit margin before interest and taxes (EBIT) to indicate a competitive gap (although some low-margin companies also have ditches). DexCom has maintained stable EBIT margins over the past year, while increasing revenue by 26% to $ 2.2 billion. It is progress.
The graph below shows how the company’s bottom line has progressed over time. To see the actual numbers, click on the graph.
In investing, as in life, the future matters more than the past. So why not watch this free DexCom interactive visualization forecast benefits?
Are DexCom Insiders Aligned with All Shareholders?
We wouldn’t expect to see insiders owning a significant percentage of a US $ 53 billion company like DexCom. But we are reassured by the fact that they are investors in the company. In particular, they own a huge stake in the company, worth $ 262 million. I would find that kind of skin in the game quite encouraging, if I owned any stock, as it would ensure that the leaders of the company would also experience my success, or failure, with the action.
Is DexCom worth watching?
DexCom’s earnings per share took off like a rocket pointed straight at the moon. This type of growth is simply eye-catching, and the large investment held by insiders certainly informs my vision for the business. Sometimes rapid growth in BPA is a sign that the business has reached an inflection point; and I like those. So, in my opinion, DexCom is worth putting on your watch list; after all, shareholders do well when the market underestimates fast-growing companies. We should say that we found out 3 warning signs for DexCom (1 is significant!) That you should know before investing here.
You can invest in any business. But if you’d rather focus on stocks that have demonstrated insider buying, here’s a list of companies that have done insider buying in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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