Key Points

• DexCom has barely scratched the surface of its niche in the diabetes market.

• As a result of industry challenges, the stock's valuation has now come down.

• But from here, the stock looks well-positioned to deliver excellent results.

• 10 stocks we like better than DexCom ›

Medical device specialist DexCom (NASDAQ: DXCM) has encountered significant headwinds in the past year. The company's financial results haven't been quite up to the market's standards, and broader market volatility caused by President Donald Trump's trade policies isn't helping either. The stock is down 26% over the trailing-12-month period.

Yet even with all these challenges, DexCom could be a terrific performer in the next five years. Here's why.

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There's plenty of white space ahead

DexCom markets continuous glucose monitoring (CGM) systems, which are devices that help track blood sugar levels in patients with diabetes. CGMs have at least two advantages: They make measurements automatically, and they make them as often as every five minutes. Consistently monitoring blood glucose levels helps people with diabetes make better health decisions. That's why CGM devices lead to improved outcomes, including less time spent in hyperglycemia.

Image source: Getty Images.

DexCom has significantly increased its installed base over the years. In 2024, it had over 2.5 million customers worldwide. However, the company remains well-positioned to capitalize on a massive global opportunity.

In the U.S., DexCom estimates that there are more than 4.5 million diabetes patients on insulin therapy who aren't on CGM yet despite being eligible for third-party coverage for the technology. And that's just the U.S., one of the more advanced countries in terms of CGM penetration. DexCom has typically targeted patients who use insulin, and third-party payers have been more willing to cover these populations.

However, last year, it launched Stelo, an over-the-counter CGM option for diabetes patients who aren't on insulin and for people with prediabetes. This move significantly expanded the company's addressable market. CGM penetration in the U.S. for type 2 diabetes patients not on insulin is about 5%, and for prediabetes patients less than 1%.

DexCom's opportunities both within and outside the U.S. are massive. The increased adoption of CGM technology has helped its revenue and earnings grow steadily over the past decade, and this trend is likely to continue.

DXCM Revenue (Annual) data by YCharts.

DexCom's shares declined last year due to poor financial results; in the U.S., more patients than the company expected took advantage of rebates, leading to lower-than-expected revenue per customer. However, since there's still plenty of work to be done in the CGM market, DexCom can address that issue as it continues to make even more headway in this field. That will allow its financial results to improve.

Are DexCom's shares too expensive?

The stock's forward price-to-earnings ratio was recently 41.5, much higher than the healthcare sector's average of 15.8. But that forward P/E is on the low end compared to DexCom's average over the past few years:

DXCM PE Ratio (Forward) data by YCharts.

The medical device specialist has historically had steep valuation metrics, but has delivered market-beating returns anyway. In my view, DexCom can do the same in the next five to 10 years.

Investors might also be concerned about DexCom's main competitor in the CGM market, Abbott Laboratories. But these rivals have battled it out for years, and there's more than enough space for both to be successful, given the large worldwide CGM opportunity.

Furthermore, DexCom benefits from a network effect, as multiple companies have developed devices for diabetes patients that are compatible with its technology; these include insulin pens and pumps, third-party apps, and the Apple Watch. The more DexCom's installed base increases, the more attractive its ecosystem becomes to device or app developers looking to target a large population of patients.

And as these companies launch more technologies compatible with DexCom's CGM devices, they also become more appealing to patients. This dynamic makes it likely that DexCom will remain a leader in CGM well beyond the next five years. In the meantime, the stock could rebound from its poor performance last year, and deliver superior returns through the end of the decade.

Should you invest $1,000 in DexCom right now?

Before you buy stock in DexCom, consider this:

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Apple. The Motley Fool recommends DexCom and recommends the following options: long January 2027 $65 calls on DexCom and short January 2027 $75 calls on DexCom. The Motley Fool has a disclosure policy.

Key Points

• Novo Nordisk's shares look attractive after a terrible performance over the past 12 months.

• DexCom has significant room to grow in its core market, despite disappointing results last year.

One of Warren Buffett's famous pieces of investing advice is to be greedy when others are fearful. One way to apply this wisdom is to look for companies that have lagged the market recently but still appear to be excellent long-term investment opportunities.

Two great examples today in the healthcare sector are Novo Nordisk (NYSE: NVO) and DexCom (NASDAQ: DXCM). Although these two corporations have encountered significant headwinds since last year, they could deliver market-beating returns to investors who initiate positions today and stick with them for at least a decade.

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Image source: Getty Images.

1. Novo Nordisk

Novo Nordisk is coming off clinical setbacks and unimpressive financial results, at least by its lofty standards. The stock has significantly underperformed the market over the trailing-12-month period. But after this beating, the company's shares look attractive. Here are several reasons why.

First, although Novo Nordisk's eternal rival, Eli Lilly, appears to be taking the lead in the fast-growing weight management market, the former still has excellent prospects in this rapidly expanding therapeutic area.

Novo Nordisk's Wegovy continues to grow its sales at a good clip, and the company is awaiting approval from the U.S. Food and Drug Administration for an oral formulation of this popular medicine. Further, Novo Nordisk has promising internally developed pipeline candidates, such as amycretin, which recently entered phase 3 studies.

The Denmark-based drugmaker has also enhanced its pipeline in this area, thanks to licensing deals and acquisitions.

Second, Novo Nordisk has been working on diversifying its lineup and currently has promising pipeline candidates outside of its core treatment areas of diabetes and obesity. Novo Nordisk is developing medicines for conditions including hemophilia, Parkinson's disease, sickle cell disease, Alzheimer's disease, and others.

Third, after being southbound for the past 12 months, Novo Nordisk's shares look reasonably valued. The company's forward price-to-earnings ratio is 16.8, compared to the 16.3 average for the healthcare industry. Novo Nordisk's financial results over the past year have been terrific by industry standards, but not quite what the market expected. That may have justified the sell-off, but at current levels, the stock looks attractive.

Finally, Novo Nordisk is a solid dividend-paying company. It has increased its annual dividend per share by almost 284% over the past decade, while offering a forward yield of 2.3%. That's not exceptional, but it's above the S&P 500 index's average of 1.3%. Novo Nordisk is well-positioned to bounce back and deliver strong returns in the next decade as it rides weight management (and other) tailwinds.

2. DexCom

DexCom is a leading diabetes-focused medical device company. It develops continuous glucose monitoring (CGM) systems that help diabetics with constant blood sugar level measurements. DexCom has been successful thanks to the increased adoption of this innovative technology. Unlike blood glucose meters that are manually operated, use pesky and painful fingersticks, and can only tell a person's sugar level at one point in time, CGM devices are constantly monitoring things and automatically make measurements as often as every five minutes.

Rrevenue and earnings have grown rapidly over the past decade, but the company hit a speed bump last year when its top-line growth slowed considerably, partly due to higher-than-expected rebates in the U.S., resulting in lower revenue per patient. That said, these are short-term issues that do little to impact the company's long-term prospects. And on that front, there are still plenty of reasons to be excited about DexCom's future.

Consider that the company has ample room to grow, even in the U.S., a country that enjoys higher CGM penetration than most others. However, as DexCom has consistently pointed out, the population of patients who use CGM continues to lag behind those who are eligible for third-party coverage -- in other words, many people could obtain the technology paid for by insurers but have not yet opted in.

Further, there is a vast worldwide opportunity, since only a tiny percentage of the diabetics in the world use CGM technology. Though many are in countries where DexCom does not do business, the company has generally increased its addressable market by entering new geographies. In the next 10 years, expect the company to do the same while benefiting from greater insurance coverage for CGM -- third-party payers, including governments, have been more willing to foot the bill because of the technology's benefits.

All that should lead to consistent revenue and earnings growth for the medical device specialist. The stock has crushed the market in the past decade using this formula. In my view, it is well-positioned to do the same through 2035.

Should you invest $1,000 in Novo Nordisk right now?

Before you buy stock in Novo Nordisk, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Novo Nordisk wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends DexCom and Novo Nordisk and recommends the following options: long January 2027 $65 calls on DexCom and short January 2027 $75 calls on DexCom. The Motley Fool has a disclosure policy.