Stock Analysis on Net
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 the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

DexCom Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 14.44%
01 FCFF0 315,352
1 FCFF1 331,045 = 315,352 × (1 + 4.98%) 289,275
2 FCFF2 354,501 = 331,045 × (1 + 7.09%) 270,686
3 FCFF3 387,097 = 354,501 × (1 + 9.19%) 258,280
4 FCFF4 430,854 = 387,097 × (1 + 11.30%) 251,203
5 FCFF5 488,646 = 430,854 × (1 + 13.41%) 248,950
5 Terminal value (TV5) 53,994,713 = 488,646 × (1 + 13.41%) ÷ (14.44% – 13.41%) 27,508,698
Intrinsic value of DexCom Inc. capital 28,827,093
Less: Debt (fair value) 3,514,900
Intrinsic value of DexCom Inc. common stock 25,312,193
 
Intrinsic value of DexCom Inc. common stock (per share) $65.51
Current share price $81.09

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

1 See details »

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.

Weighted Average Cost of Capital (WACC)

DexCom Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 31,331,062 0.90 15.98%
Debt (fair value) 3,514,900 0.10 0.75% = 0.87% × (1 – 13.74%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 386,373,935 × $81.09
= $31,331,062,389.15

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (12.69% + 11.04% + 21.00% + 2.98% + 21.00%) ÷ 5
= 13.74%

WACC = 14.44%

FCFF Growth Rate (g)

FCFF 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)
Interest expense 18,600 100,300 84,700 60,300 22,700
Net income (loss) 341,200 154,700 493,600 101,100 (127,100)
 
Effective income tax rate (EITR)1 12.69% 11.04% 21.00% 2.98% 21.00%
 
Interest expense, after tax2 16,240 89,227 66,913 58,503 17,933
Interest expense (after tax) and dividends 16,240 89,227 66,913 58,503 17,933
 
EBIT(1 – EITR)3 357,440 243,927 560,513 159,603 (109,167)
 
Short-term finance lease liabilities 4,200 3,300 8,800 600 —
Current portion of long-term senior convertible notes 772,600 — — — —
Long-term senior convertible notes 1,197,700 1,702,700 1,667,200 1,059,700 1,010,300
Long-term finance lease liabilities 59,600 57,000 54,000 14,400 7,300
Stockholders’ equity 2,131,800 2,251,500 1,826,500 882,600 663,300
Total capital 4,165,900 4,014,500 3,556,500 1,957,300 1,680,900
Financial Ratios
Retention rate (RR)4 0.95 0.63 0.88 0.63 —
Return on invested capital (ROIC)5 8.58% 6.08% 15.76% 8.15% -6.49%
Averages
RR 0.78
ROIC 6.42%
 
FCFF growth rate (g)6 4.98%

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).

1 See details »

2022 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 18,600 × (1 – 12.69%)
= 16,240

3 EBIT(1 – EITR) = Net income (loss) + Interest expense, after tax
= 341,200 + 16,240
= 357,440

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [357,440 – 16,240] ÷ 357,440
= 0.95

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 357,440 ÷ 4,165,900
= 8.58%

6 g = RR × ROIC
= 0.78 × 6.42%
= 4.98%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (34,845,962 × 14.44% – 315,352) ÷ (34,845,962 + 315,352)
= 13.41%

where:

Total capital, fair value0 = current fair value of DexCom Inc. debt and equity (US$ in thousands)
FCFF0 = the last year DexCom Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of DexCom Inc. capital

FCFF growth rate (g) forecast

DexCom Inc., H-model

Microsoft Excel
Year Value gt
1 g1 4.98%
2 g2 7.09%
3 g3 9.19%
4 g4 11.30%
5 and thereafter g5 13.41%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 4.98% + (13.41% – 4.98%) × (2 – 1) ÷ (5 – 1)
= 7.09%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 4.98% + (13.41% – 4.98%) × (3 – 1) ÷ (5 – 1)
= 9.19%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 4.98% + (13.41% – 4.98%) × (4 – 1) ÷ (5 – 1)
= 11.30%