DexCom is great. Here’s why you shouldn’t buy it.

DexCom (DXCM -1.40%) it’s not a stock investors should rush to sell. It has several different opportunities to continue generating growth, it has plenty of recurring revenue, and its stock valuation is reasonable. But you still shouldn’t buy it right now.

Chances are good he’ll continue to be a decent performer going forward. However, it faces two key issues that need to be successfully addressed to make the stock worth buying again. Let’s take a look to understand why it’s a much riskier play than it used to be.

Why it’s a great stock and a great company

DexCom has a handful of things that make it the kind of business that investors would typically want to own. First, its key product — continuous glucose monitors (CGMs) — helps provide it with a steady stream of recurring revenue. People with diabetes wear their CGMs, which are attached to their bodies, for a few weeks, then throw them away and buy more.

The purpose of a CGM is to help patients regulate their blood glucose levels, which they will likely need to do for the rest of their lives, so onboarding new customers will likely drive revenue growth for years to come. Even though customer acquisition costs are on the high side, in the long run, the recurring spend and the opportunity to upsell customers on new products or software services related to their CGMs make the process quite profitable.

As a result, DexCom’s trailing 12 month (TTM) revenue and net income have grown steadily over the past five years, reaching $3.9 billion in sales and $666.9 million in net income. Take a look at this chart:

DXCM Revenue (TTM) data by YCharts.

In addition, the business is pursuing new avenues of growth by entering international markets such as the UK, Germany, Japan, Spain, Bulgaria, Romania and beyond. Nor is it making inroads into the US market.

In late August, it launched the first over-the-counter glucose sensor, further lowering the barrier for patients to purchase its products. It’s hard to imagine that DexCom won’t continue to add to its revenue over the next few years and beyond, especially as more and more people are diagnosed with diabetes.

So why not buy it?

The competitive landscape is rapidly changing against him

There are two big reasons why this stock is not a great choice for most investors right now. Competition is becoming a bigger factor, and some of DexCom’s peers are extraordinarily strong.

In particular, Abbott Laboratories and its FreeStyle Libre line of CGMs pose a distinct threat to DexCom’s market share, as does Medtronichis Guardian Connect device. At some popular retailers, one of Abbott’s CGMs is about a third more expensive than DexCom’s. There is only so much that companies can do to differentiate their products from one another. This makes competing on price a powerful way to steal market share, especially when the difference between options is so wide.

So the business will probably have to spend more on marketing and research and development (R&D) to differentiate itself as much as possible, to lower the unit prices it offers to customers and to market its products in a more aggressive. This will put pressure on its earnings and possibly its revenue growth. These pressures are light now, but will increase over time as more players enter the space.

The other major reason it’s somewhat risky to invest in DexCom stock is that demand for CGM may not be as strong in the future as it is today. This is due to the proliferation of new and highly effective drugs that treat type 2 diabetes and obesity, which is a major risk factor for developing diabetes. Eli Lilly and Novo Nordisk both are making successful drugs that could avoid the need for many millions of people to use CGMs.

While DexCom and Abbott see their CGMs as improving glycemic control in combination with the use of these drugs, the clinical benefit may not yet be fully clear. More data may clear this point in the company’s favor, but for now it could add even more uncertainty.

With a little time and more spending on marketing and R&D, it’s quite possible that DexCom will continue as energetically as ever, enriching its shareholders and refuting the arguments laid out here. But unlike its highly reliable growth in the past, now is a time of great uncertainty, and therefore you should not buy the stock until at least some of the uncertainty is resolved.