DexCom stock is favored over 3M stock due to its superior revenue growth, profitability, and financial position. While both companies have a similar market capitalization of around $50-60 billion, investors have assigned a higher valuation multiple of 13x for DexCom stock compared to 1.7x for 3M. In the last three years, DexCom stock has seen gains of 45% while 3M has experienced a decline of 15%. DexCom has outperformed 3M in terms of revenue growth, stock returns, and valuation multiples.
DexCom’s average annual revenue growth over the last three years has been 23%, compared to just 1% for 3M. DexCom’s revenue has increased from $1.9 billion to $3.6 billion during this period, driven by new customer additions and rising awareness of continuous glucose monitoring devices. In contrast, 3M saw a spike in sales in 2021 due to high demand for masks and personal protective equipment during the Covid-19 pandemic, but its sales declined around 8% between 2021 and 2023. 3M is facing challenges in its consumer business and is dealing with litigation issues.
In terms of profitability, DexCom has a higher operating margin and lower financial risk compared to 3M. DexCom’s operating margin expanded slightly from 15.5% to 16.5% over the last three years, while 3M’s reported operating margin was significantly impacted by settlement charges related to litigation. DexCom also has a lower debt-to-equity ratio and higher cash reserves, indicating a stronger financial position. DexCom’s adjusted operating income was higher at 19.8% in 2023.
When comparing the valuation multiples for both stocks against their historical averages, DexCom is seen as the better choice. 3M’s stock currently trades at 1.7x trailing revenues, compared to its last three-year average of 2.2x, while DexCom is trading at 13x revenues, compared to its last three-year average of 16.4x. While 3M has taken steps to improve profitability, there are near-term risks that could impact its earnings growth. DexCom, on the other hand, is expected to see continued growth in its customer base and demand for its products.
Overall, DexCom is viewed as a better investment option compared to 3M, given its strong revenue growth, profitability, and financial position. While both companies face uncertainties in the macroeconomic environment, DexCom is expected to outperform 3M in the next three years. Investors can explore other valuable comparisons for companies across industries at Peer Comparisons to make informed investment decisions.
