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Last update on 2024-06-06

DexCom (DXCM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Discover the Piotroski F-Score analysis of DexCom (DXCM) for 2023, highlighting strong financial health with a final score of 7 out of 9.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running DexCom (DXCM) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

DexCom (DXCM) scored 7 out of 9 on the Piotroski F-Score, indicating a strong financial position. Key strengths include positive net income, growing cash flow, improved return on assets (ROA), a current ratio that shows high liquidity, and a decreased number of outstanding shares, suggesting potential buybacks. However, areas of concern include increased leverage, which raises financial risk, and a slight decrease in gross margin, indicating potential issues with operational efficiency.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 7, DexCom demonstrates strong fundamentals in many areas like profitability and liquidity. The company has shown improvements in net income, operating cash flow, ROA, and asset turnover, suggesting strong growth and operational efficiency. The increased current ratio indicates good liquidity. However, the increased leverage and slight drop in gross margin warrant monitoring. Overall, the stock appears to be a strong investment candidate, but potential investors should keep an eye on the leverage and margin trends to ensure long-term stability.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of DexCom (DXCM)

Company has a positive net income?

Net income measures a company's total earnings, factoring in costs and expenses. Positive net income reflects profitability and operational success.

Historical Net Income of DexCom (DXCM)

DexCom (DXCM) has a net income of $541.5 million for 2023. Historically, this is a notable improvement compared to its negative net income figures which persisted up to 2016. Despite a sharp increase in 2017 to $101.1 million and subsequent increases, the company recorded its highest net income in 2023 at $541.5 million. This consistent uptrend from 2017 through 2023 signifies not just profitability but operational efficiency and growth, earning 1 point in the Piotroski score. The trend is strongly positive and indicates sound management practices.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular operating activities. It is vital as it shows the ability of the company to generate sufficient positive cash flow to maintain and grow operations.

Historical Operating Cash Flow of DexCom (DXCM)

DexCom (DXCM) exhibited a positive CFO in 2023 amounting to $748.5 million. This positive cash flow is crucial as it indicates strong operational efficiency and profitability. Observing the trend over the past 20 years, we see that DexCom transformed from negative CFOs consistently up until 2012 to robustly positive figures starting from 2013. This trend underscores a powerful growth trajectory. Their CFO growth, with $748.5 million in 2023, marks their highest ever and confirms their strong operational capabilities, reflecting adequate liquidity and financial health. Thus, DexCom scores 1 point for having a positive CFO.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion evaluates a company's efficiency in using its assets to generate earnings compared to previous years. An increase in ROA suggests improved profitability and operational efficiency.

Historical change in Return on Assets (ROA) of DexCom (DXCM)

DexCom's ROA increased from 0.0661 in 2022 to 0.0929 in 2023. This increment signifies that DexCom has become more efficient in utilizing its assets to produce net income. Over the last 20 years, DexCom has seen fluctuations in operating cash flow but has shown consistent improvement in recent years. Despite this gain, it's noteworthy that the industry median ROA has consistently been much higher, hovering around 0.504 in 2023. Nonetheless, the improvement in DexCom's ROA implies a positive trend in its operational performance and profitability. Therefore, 1 point is awarded for this criterion.

Operating Cashflow are higher than Netincome?

The criterion evaluates whether the operating cash flow is higher than net income. This indicates a company's core operations generate sufficient cash flow, suggesting healthy liquidity and potential for growth.

Historical accruals of DexCom (DXCM)

For the year 2023, DexCom reported an Operating Cash Flow of $748.5 million and a Net Income of $541.5 million. In this case, the Operating Cash Flow is indeed higher than the Net Income, adding 1 point to the Piotroski Score. This reflects positively on DexCom's financial health, highlighting its ability to convert profits into cash flow. A consistent trend in increasing Operating Cash Flow over the years, as shown in the additional data, reiterates strong operational performance. Specifically, since 2013, DexCom's Operating Cash Flow has substantially outpaced its Net Income, underscoring robust cash generation and controlled accruals, making this a favorable indicator.

Liquidity of DexCom (DXCM)

Leverage is declining?

Leverage refers to the ratio of a company's total debt to its equity. Lower leverage is generally seen as a positive indicator as it implies that the company is less reliant on debt.

Historical leverage of DexCom (DXCM)

Analyzing DexCom's leverage from 2022 (0.2507) to 2023 (0.4107), it's evident that leverage has increased. This is a negative indicator because an increase in leverage suggests higher reliance on debt, which enhances financial risk. Historically, DexCom's leverage has seen fluctuations with peaks in 2008 (1.3845) and 2019 (0.5273). While 0.4107 isn't the highest, the rising trend from 2022 to 2023 signals increased financial risk.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates greater liquidity and financial health.

Historical Current Ratio of DexCom (DXCM)

In 2023, DexCom's Current Ratio increased to 2.8444 from 1.9947 in 2022, showing an improvement in liquidity. This upward trend suggests that DexCom is better positioned to cover its short-term obligations, reflecting positively on its financial health. Compared to the Industry Median Current Ratio of 2.3682 in 2023, DexCom's ratio is higher, indicating stronger liquidity. Over the past 20 years, DexCom has experienced fluctuations in its Current Ratio, but the current increase and standing above the industry median are positive signs. Thus, 1 point should be added for this criterion.

Number of shares not diluted?

Change in Shares Outstanding assesses whether a company is issuing more shares or buying back existing shares. Decreasing outstanding shares is often seen positively as it can indicate share buyback.

Historical outstanding shares of DexCom (DXCM)

For 2022, DexCom had 389,400,000 outstanding shares, while for 2023, the number stood at 386,000,000. This represents a decrease of approximately 0.87%. According to the Piotroski score criteria, a decrease in outstanding shares is awarded 1 point. Thus, DexCom earns 1 point in this category. This downward trend is beneficial as it signifies that the company is potentially engaging in share buybacks, which might enhance shareholder value by consolidating ownership and often suggest management's confidence in the firm's future.

Operating of DexCom (DXCM)

Cross Margin is growing?

Gross Margin measures the proportion of revenue that exceeds the cost of goods sold (COGS). It's crucial for analyzing the efficiency of a company in managing its production costs. An increasing Gross Margin suggests better efficiency and profitability.

Historical gross margin of DexCom (DXCM)

The Gross Margin for DexCom (DXCM) has slightly decreased from 0.6472 in 2022 to 0.6319 in 2023, hence the point for this criterion is 0. This downward shift suggests a small decline in operational efficiency. Despite this, DexCom maintains a significantly higher Gross Margin compared to the industry's median of 0.504 in 2023, indicating sustained competitive advantage in cost management. Historically, DexCom’s Gross Margin shows a significant improvement from negative figures in its early years, achieving industry-defeating margins. The current minor decrease, although not ideal, may be part of regular fluctuations, but it warrants monitoring to ensure this isn't a budding trend of decreasing efficiency.

Asset Turnover Ratio is growing?

Asset turnover measures a firm's efficiency in using its assets to generate sales. A higher ratio indicates better performance.

Historical asset turnover ratio of DexCom (DXCM)

DexCom's Asset Turnover increased from 0.5636 in 2022 to 0.6215 in 2023, signifying an improvement in utilizing its assets to generate revenue. This increase earns DexCom an additional point in the Piotroski Analysis, highlighting better asset utilization. Historical data shows considerable fluctuations, but the increase in 2023 is a positive indicator.


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