Getting to $1 million is a great long-term goal for investors to target. Not only could that be a good nest egg to tap into during retirement, but you could also use that money to invest in dividend stocks to generate some solid recurring income. Either way, you would have plenty of options to consider to make the most of that money.
But the important piece of the puzzle is how to get to $1 million in 10, 20, or 30 years from now. One way can be to invest in a growing business with lots of potential in the future. DexCom (DXCM +1.55%), which is a big name in diabetes care, is a possible option. Below, I'll look at whether the stock could help make you a millionaire.
NASDAQ: DXCM
Key Data Points
The need for diabetes care could rise significantly
DexCom makes continuous glucose monitoring (CGM) devices, which help people with diabetes stay on top of their glucose levels. And demand for those devices should rise as the number of people with diabetes increases. While not every diabetic will need or use a CGM, there should certainly be a significant uptick in demand.
By 2050, analysts estimate that there will be 1.3 billion people living with diabetes, which is more than double the 529 million who had the disease in 2021.
And by 2030, the market for CGMs could be worth an estimated $11.2 billion, according to data from Grand View Research. It's currently growing at a compound annual rate of 4.4%. That's not terribly fast, but it does suggest steady growth ahead for the company.
In fact, the recent past has seen DexCom's revenue grow quite robustly -- from just under $1.5 billion in 2019 to more than $2.9 billion in 2022 -- doubling within a span of three years.
Could GLP-1 drugs derail the growth?
The big concern on the minds of many investors these days is whether glucagon-like peptide 1 (GLP-1) drugs such as Wegovy and Ozempic could have a negative impact on the growth potential for DexCom. GLP-1 drugs have been effective in helping people lose weight by suppressing their appetite. They can help improve blood sugar levels as well, which may potentially diminish demand for CGMs.
As of now, it's a bit early to tell whether that will be the case or not. The early signs are that the people who have been using GLP-1 drugs have been using CGMs more. DexCom CEO Kevin Sayer stated on the company's earnings call last month, "The data clearly show that CGM usage grows faster in GLP-1 users than those who are not on therapy."
DexCom's sales for the most recent quarter, which ended on Sept. 30, rose by 27% to $975 million. The company also reported a high operating profit of $205.5 million, which was 21% of the top line. While DexCom's growth rate has been slowing down over the years, in recent quarters it has been trending upward:
DXCM Revenue (Quarterly YOY Growth) data by YCharts.
However, it's a bit early to tell what the impact of GLP-1 drugs will be. While people may be using CGMs to monitor the effectiveness of the drugs, that may not necessarily be a trend that holds up over the long haul, especially if concerns over blood sugar levels subside over time.
Can DexCom deliver strong returns long term?
If you had invested $10,000 in DexCom 10 years ago, your investment would be worth more than $115,000 right now. That's some solid growth, but you would need to do much better than that to get to $1 million -- unless you're investing six figures into the healthcare stock, which most investors can't afford to do.
Suppose you invest at the age of 35 and have 30 investing years to go before retirement. That's a good number of years left, but if you're investing only $10,000, you would need your investment to effectively be not only a 10-bagger but a 100-bagger. For a stock to grow to 100 times its value, it would need to average an annual growth rate of approximately 16.6% over a 30-year period. That's well above the S&P 500 average over the long run, which is around 10%. The market for CGMs is only growing at a rate of 4.4%, according to analysts -- and that could diminish if GLP-1 drugs have a negative impact on demand.
Let's say you decide to invest more money. At $25,000, your investment would need to grow to 40 times its value. Then, the CAGR would need to be 13.1%. That's lower, but it's still notably higher than the broader market average.
Based on the growth rates needed and the threat GLP-1 drugs pose to CGMs, it's hard to make a case that you could end up becoming a millionaire from owning shares of DexCom without making a substantial investment in the company.
Should you invest in DexCom stock anyway?
Shares of DexCom are down 13% this year as concerns relating to its future growth mount despite the company's strong performance. Another problem is the stock's hefty price-to-earnings multiple, which stands at over 100, meaning that investors are paying a significant premium for the shares right now.
This can still be a good long-term investment given the ongoing need for diabetes care and earnings that continue to rise, but investors should temper their expectations for the stock as its gains ahead may not be as impressive as they have been over the past decade, given the potential headwinds that the company is facing.
