2 Healthcare Stocks That Could Outperform the Market Over the Next Decade

The article highlights TransMedics and Dexcom as long-term healthcare winners, citing strong fundamentals and large untapped markets. TransMedics reported 2025 revenue of $605.5 million, up 37% year over year, with EPS rising to $4.87 from $1.01, while Dexcom posted $4.7 billion in revenue, up 16%, and EPS of $2.09 versus $1.42. Key growth drivers include TransMedics’ potential kidney OCS expansion and Dexcom’s Stelo OTC CGM launch, but the piece is primarily bullish commentary rather than new company-specific news.

Analysis

The market is likely underestimating how much of TMDX’s value creation is coming from workflow capture, not just device penetration. Once the company owns retrieval-to-delivery logistics, it starts to behave less like a hardware vendor and more like a transaction network with switching costs, which can support margin durability and recurring revenue even if procedure growth moderates. The key second-order effect is that better organ utilization can pull transplant programs forward on capacity: hospitals that can complete more successful cases have an incentive to expand utilization of the platform, tightening the ecosystem and raising competitive barriers for cold-chain incumbents.

For DXCM, the real bull case is not simply diabetes management; it is category expansion and payer normalization. If CGM becomes a default monitoring layer for prediabetes and select non-diabetic users, the addressable market shifts from specialty device to quasi-consumer health infrastructure, which can materially extend growth duration beyond the current diabetes cohort. The GLP-1 concern looks overstated because it ignores the data-feedback loop: weight-loss therapy may increase the value of glucose visibility during titration and adherence, making CGM more complementary than substitutive.

The main risk across both names is not demand collapse but timing mismatch. TMDX likely has more execution risk because its growth thesis depends on scaling a logistics-heavy operating model and winning regulatory/commercial acceptance in new organ categories; any service-level failure could quickly pressure adoption. DXCM is lower risk structurally, but reimbursement compression or slower international rollout could cap multiple expansion even if revenue grows at a healthy pace.

Consensus may be too linear on both stocks: it is pricing product adoption as the driver, when the deeper upside comes from platformization. That argues for a longer-duration hold in DXCM and a higher-beta, catalyst-driven approach in TMDX, where the kidney launch or Europe penetration could re-rate the story in months rather than years.

Key Decisions for Investors

• Long DXCM on pullbacks over the next 1-3 months; use it as the lower-volatility compounder in the group. Risk/reward favors upside if reimbursement and international expansion continue, with downside primarily from multiple compression rather than business deterioration.
• Speculative long TMDX only on confirmation of operational execution in Europe or kidney-program progress; size smaller than DXCM due to logistics and regulatory execution risk. Expect higher beta over the next 6-12 months.
• Pair trade: long DXCM / short a basket of weaker diabetes hardware or monitoring names if CGM penetration continues to broaden; thesis is that the category winner captures the incremental reimbursement dollars while smaller players face pricing pressure.
• For TMDX, consider a call spread rather than outright equity if you want exposure to a catalyst over the next 6-9 months. The thesis needs a discrete re-rating event; structure the trade to limit downside if rollout timing slips.
• Avoid chasing both names after strong runs; wait for market weakness to enter, since the best entry is likely when investors overreact to quarter-to-quarter growth normalization rather than the multi-year platform opportunity.