Watch Out: Barbarians At The Gate For DexCom (DXCM)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified DexCom ( DXCM) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified DexCom as such a stock due to the following factors:

  • DXCM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.7 million.
  • DXCM has traded 136,381 shares today.
  • DXCM traded in a range 218.2% of the normal price range with a price range of $3.23.
  • DXCM traded above its daily resistance level (quality: 526 days, meaning that the stock is crossing a resistance level set by the last 526 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on DXCM:

DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring systems. Currently there are 10 analysts that rate DexCom a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for DexCom has been 591,700 shares per day over the past 30 days. DexCom has a market cap of $3.3 billion and is part of the health care sector and health services industry. The stock has a beta of 0.87 and a short float of 6.5% with 6.78 days to cover. Shares are up 26% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DexCom as a sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, DEXCOM INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for DEXCOM INC is currently very high, coming in at 71.09%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -10.20% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 588.88% to $6.20 million when compared to the same quarter last year. In addition, DEXCOM INC has also vastly surpassed the industry average cash flow growth rate of -40.74%.
  • DXCM's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.53, which clearly demonstrates the ability to cover short-term cash needs.
  • This stock has increased by 53.16% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in DXCM do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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