2 magnificent growth stocks down 45% and 32% to buy right now

The market has shorted quite a number of stocks in recent years, and some for good reason. At the same time, the stock price alone tells you relatively little other than what the broader market seems to think the stock is worth at the time. A stock can easily be overvalued or undervalued, and it’s important to understand the factors behind the stock’s performance before deciding whether it’s right for your portfolio.

If you’re looking for quality companies trading on sale, there are plenty of contenders to consider. Here are two such magnificent growth stocks that you can buy at a discount right now.

1. DexCom

DexCom (NASDAQ: DXCM) is known for its range of continuous glucose monitoring (CGM) devices, which allow diabetics and even pre-diabetics to track their blood sugar levels to mitigate adverse events. Investors have been particularly hard on this stock recently, sending the stock down about 45% since the start of 2024. A stock trade for sale should never be the main reason to buy or sell a stock, and it’s important to research deeper to determine what factors move the needle.

In DexCom’s case, the company owns a sizable market share of the multibillion-dollar and growing addressable CGM industry. It is consistently profitable and the revenue is constantly growing. The biggest challenge facing DexCom, and the likely reason behind the volatility that has plagued the stock in recent months, is the continued emergence and success of glucagon-like peptide-1 (GLP-1) agonist drugs.

GLP-1 drugs have been around for a long time, but more consumers and investors alike have recently been alerted to the potential of these drugs for use in chronic weight management as well as diabetes management. Although GLP-1 drugs can be incredibly effective in treating diabetes, including allowing for better insulin production and managing the amount of sugar the liver produces, they do not replace the need for a CGM. A CGM is used to access real-time information about how a patient’s blood sugar is doing. In any case, these tools can go hand in hand with GLP-1 drugs.

The idea that these drugs would somehow eliminate the potential of the CGM market seems far-fetched. A few other elements that may have caused some investors to ditch the company’s stock include a slight adjustment to its annual guidance in its recent earnings report and the fact that cuts to its flagship G7 CGM were implemented faster than expected, which led to a short duration. – long-term impact on income.

The story continues

For what it’s worth, DexCom continues to launch new products and expand its growth story. And his top and bottom lines are still in good shape. As an example, in the second quarter of 2024, DexCom reported a 15% year-over-year increase in revenue to $1 billion, while its net income rose 24% to 143, 5 million dollars. Broken down by region, US revenue was up 19% from a year ago, while international revenue was up 7%. The company also had cash and investments of $3.1 billion at the end of the quarter, while the revolving credit facility remained unused.

DexCom recently launched the first over-the-counter glucose biosensor approved in the US, called Stelo. The Stelo Biosensor is available to users 18 years and older who are not treated with insulin. This effectively opens up DexCom’s access to a market of 125 million Americans who either have type 2 diabetes but do not need insulin or are still prediabetic. The sensor sends personalized glucose information directly to the user’s smartphone and offers a wear time of up to 15 days. Stelo also has flexible payment options, including an $89 recurring monthly subscription or a pay-as-you-go approach where a user purchases two sensors in one package for a flat fee of $99.

The use cases for CGMs go far beyond type 1 diabetes, although the majority of current CGM users fall into this category. This creates a large and still untapped total addressable market (TAM) for DexCom, even in a fragmented space with increasing competition. With a solid financial foundation and a growing portfolio of CGM devices targeting every segment of the diabetes patient population, it looks like there’s still room to run here. The idea that DexCom’s growth story is somehow a thing of the past seems short-sighted.

Investors may want to consider even a modest investment in depressed stocks when adding to a well-diversified portfolio.

2. Bill Holdings

Bill Holdings (NYSE: BILL) specializes in financial automation software for small and medium businesses. Shares are down about 32% since the start of this year, not because of particularly alarming news or any serious financial missteps the company has reported. Rather, the stock’s performance appears to be tied to a number of factors, including continued volatility among growth-oriented businesses, particularly those still working to achieve consistent profitability.

The idea behind the Bill Holdings business is to provide the virtual back office that small and medium businesses need to run smoothly. From paying suppliers to collecting payments from customers, the software they provide is designed to be a complete solution for day-to-day essential operations for companies in a wide range of sectors. These solutions include automation software for accounts payable and receivable, including digital workflow and documentation management.

Bill Holdings also provides software services for expense management, as well as optimizing payment services for sources such as card payments, ACH payments, cross-border payments, checks and invoice financing. Bill Holdings makes most of its revenue from subscription fees and transaction fees. Subscription revenue is based on annual and monthly subscriptions charged to customers, while transaction revenue involves interchange fees as well as transaction fees that may be fixed or variable.

Examples of activities that would accrue transaction fees for the business include invoice funding, invoice creation, card payments, and ACH payments. A smaller portion of revenue is derived from interest on funds it holds for customers when it processes payment transactions and deposits the money in a Bill Holdings bank account until the funds are credited to the recipient.

Bill Holdings reported its fiscal 2024 results in August. At the end of the company’s fiscal year, 474,600 companies worldwide were using its software solutions. Total revenue for the 12-month period rose 22% year over year to $1.3 billion. Core revenue, comprised of subscription and transaction fees, rose 19% year over year to $1.1 billion. Interest on funds held for clients, known as floating income, was $167.4 million. Bill Holdings also reported a gross profit of $1.1 billion for the 12-month period.

Bill Holdings is not yet profitable under generally accepted accounting principles (GAAP). However, the company narrowed its net loss to $28.9 million, compared to $223.7 million in fiscal 2023. Non-GAAP net income for the 12-month period totaled $244 million. On another positive note, Bill Holdings has positive cash flow, an important measure of profitability for investors to pay attention to. The company generated free cash flow totaling approximately $258 million in fiscal 2024, up 65% from fiscal 2023.

Meanwhile, management estimates that its total addressable market includes more than 70 million small businesses and sole proprietors globally and $344 billion in software spending by small and midsize businesses worldwide. Other economic hardships may reduce spending for smaller businesses, but most cannot afford to sacrifice critical aspects of operations such as payment management software.

The company appears to have a solid growth track in an expanding addressable market to watch, and its financials are rapidly going from strength to strength. These green flags could prompt some investors to buy shares of Bill Holdings at a discount.

Should you invest $1,000 in DexCom right now?

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Rachel Warren holds positions in DexCom. The Motley Fool has positions in and recommends Bill Holdings. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.

2 Magnificent Growth Stocks Down 45% and 32% to Buy Right Now was originally published by The Motley Fool