DCF Studio

    DXCM · NMS · Healthcare

    DexCom, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 24.73

    Market price

    USD 89.35

    Implied upside

    -72.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 8.9% of revenue against depreciation of 5.3%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 29.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 24.73-72.3%
    Exit multiple
    USD 72.49-18.9%
    Market price
    USD 89.35

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 5.5bnUSD 6.4bnUSD 7.5bnUSD 8.7bnUSD 10.2bn+17.0%
    EBITUSD 878.0mUSD 1.0bnUSD 1.2bnUSD 1.4bnUSD 1.6bn+17.0%
    NOPATUSD 694.1mUSD 812.2mUSD 950.4mUSD 1.1bnUSD 1.3bn+17.0%
    Add depreciation & amortisationUSD 290.4mUSD 339.8mUSD 397.6mUSD 465.2mUSD 544.4m+17.0%
    Less capital expenditureUSD -487.7mUSD -570.7mUSD -667.8mUSD -781.4mUSD -914.4m+17.0%
    Less increase in working capitalUSD 130.4mUSD 152.6mUSD 178.5mUSD 208.9mUSD 244.4m-17.0%
    Free cashflow to firmUSD 627.1mUSD 733.8mUSD 858.7mUSD 1.0bnUSD 1.2bn+17.0%
    Discount factor0.94610.84680.75800.67850.6073-
    Present valueUSD 593.3mUSD 621.4mUSD 650.9mUSD 681.7mUSD 714.0m+4.7%
    Present Value Of The ForecastUSD 3.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.281Reported 1.419, pulled toward 1.0 (Blume)
    Cost of equity12.04%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 33.7bn96.0% of capital
    Total debtUSD 1.4bn4.0% of capital, book value as a proxy
    Tax rate20.9%Effective, capped at statutory
    WACC11.72%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 24.73

    69% of EV

    Forecast FCFF, final year
    USD 1.2bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (21.3% of NOPAT)
    USD -290.8m
    Capitalised
    USD 1.1bn
    ROIC (WACC floor)
    11.7%
    Terminal value, undiscounted
    USD 11.9bn
    Terminal value, discounted
    USD 7.2bn
    Enterprise value
    USD 10.5bn
    Less net debt
    USD 472.0m
    Equity value
    USD 10.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 72.49

    89% of EV

    Terminal value, undiscounted
    USD 43.8bn
    Terminal value, discounted
    USD 26.6bn
    Enterprise value
    USD 29.9bn
    Less net debt
    USD 472.0m
    Equity value
    USD 29.4bn

    Spread between methods: 98%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.72%30.6930.9331.1931.4831.79
    10.72%27.2027.3027.4027.5027.59
    11.72%24.5624.6524.7324.8224.91
    12.72%22.3522.4222.5022.5822.66
    13.72%20.4620.5320.6020.6720.74

    Outlined: this model. Green text: above today's price of 89.35. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year17.0%51.9%+34.9pp
    EBIT margin16.1%56.2%+40.1pp
    Discount rate11.7%5.1%-6.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.