Stock Analysis on Net

DexCom Inc. (NASDAQ:DXCM)

This company has been moved to the archive! The financial data has not been updated since October 26, 2023.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

DexCom Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 15.24%
01 FCFE0 304,700
1 FCFE1 335,848 = 304,700 × (1 + 10.22%) 291,432
2 FCFE2 373,462 = 335,848 × (1 + 11.20%) 281,213
3 FCFE3 418,937 = 373,462 × (1 + 12.18%) 273,736
4 FCFE4 474,042 = 418,937 × (1 + 13.15%) 268,779
5 FCFE5 541,027 = 474,042 × (1 + 14.13%) 266,190
5 Terminal value (TV5) 55,631,599 = 541,027 × (1 + 14.13%) ÷ (15.24%14.13%) 27,371,261
Intrinsic value of DexCom Inc. common stock 28,752,611
 
Intrinsic value of DexCom Inc. common stock (per share) $74.42
Current share price $81.09

Based on: 10-K (reporting date: 2022-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.67%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of DexCom Inc. common stock βDXCM 1.16
 
Required rate of return on DexCom Inc. common stock3 rDXCM 15.24%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rDXCM = RF + βDXCM [E(RM) – RF]
= 4.67% + 1.16 [13.79%4.67%]
= 15.24%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

DexCom Inc., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Net income (loss) 341,200 154,700 493,600 101,100 (127,100)
Revenue 2,909,800 2,448,500 1,926,700 1,476,000 1,031,600
Total assets 5,391,700 4,863,600 4,290,500 2,395,000 1,916,000
Stockholders’ equity 2,131,800 2,251,500 1,826,500 882,600 663,300
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 11.73% 6.32% 25.62% 6.85% -12.32%
Asset turnover3 0.54 0.50 0.45 0.62 0.54
Financial leverage4 2.53 2.16 2.35 2.71 2.89
Averages
Retention rate 1.00
Profit margin 7.64%
Asset turnover 0.53
Financial leverage 2.53
 
FCFE growth rate (g)5 10.22%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income (loss) ÷ Revenue
= 100 × 341,200 ÷ 2,909,800
= 11.73%

3 Asset turnover = Revenue ÷ Total assets
= 2,909,800 ÷ 5,391,700
= 0.54

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 5,391,700 ÷ 2,131,800
= 2.53

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 7.64% × 0.53 × 2.53
= 10.22%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (31,331,062 × 15.24%304,700) ÷ (31,331,062 + 304,700)
= 14.13%

where:
Equity market value0 = current market value of DexCom Inc. common stock (US$ in thousands)
FCFE0 = the last year DexCom Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on DexCom Inc. common stock


FCFE growth rate (g) forecast

DexCom Inc., H-model

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Year Value gt
1 g1 10.22%
2 g2 11.20%
3 g3 12.18%
4 g4 13.15%
5 and thereafter g5 14.13%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 10.22% + (14.13%10.22%) × (2 – 1) ÷ (5 – 1)
= 11.20%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 10.22% + (14.13%10.22%) × (3 – 1) ÷ (5 – 1)
= 12.18%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 10.22% + (14.13%10.22%) × (4 – 1) ÷ (5 – 1)
= 13.15%