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ResMed Inc RMD

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Today’s Gainers
$218.06 +34.64 (18.89%)
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Company Report

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ResMed Earnings: Impressive Performance with Strong Device Sales and Sharp Rebound in Gross Margin

Shane Ponraj

Shares in narrow-moat ResMed remain undervalued following a strong third-quarter fiscal 2024. Underlying EBIT of USD 394 million was 8% higher than second-quarter fiscal 2024, with sales up 3% and the underlying EBIT margin expanding 145 basis points to 33%. Sales growth was largely driven by new patient demand while gross margins expanded significantly due to reduced freight and manufacturing cost improvements. Given the quicker-than-expected margin improvement, we increase our fiscal 2024 underlying EBIT forecast by 5% to USD 1.47 billion. Our long-term earnings estimates increase more modestly by roughly 2%. We raise our fair value estimate by 2% to USD 264, or AUD 40 per CDI at current exchange rates.

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Price vs Fair Value

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RMD is trading at a 30% discount.
Price
$180.35
Fair Value
$423.00
Uncertainty
Medium
1-Star Price
$935.20
5-Star Price
$591.70
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

The long-term growth opportunity for respiratory homecare devices is sizable as both developed and emerging markets are still significantly underpenetrated.

Bears

Market share gains from Philips’ product recall may be limited as affected customers can wait for a replacement unit, purchase an alternative Philips product, and ResMed’s supply chain may be constrained.

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Trading Information

Previous Close Price
$183.42
Day Range
$201.86–218.38
52-Week Range
$132.24–243.52
Bid/Ask
$216.10 / $220.00
Market Cap
$32.07 Bil
Volume/Avg
4.3 Mil / 1.1 Mil

Key Statistics

Price/Earnings (Normalized)
30.08
Price/Sales
7.02
Dividend Yield (Trailing)
0.86%
Dividend Yield (Forward)
0.88%
Total Yield
1.02%

Company Profile

ResMed is one of the largest respiratory care device companies globally, primarily developing and supplying flow generators, masks and accessories for the treatment of sleep apnea. Increasing diagnosis of sleep apnea combined with ageing populations and increasing prevalence of obesity is resulting in a structurally growing market. The company earns roughly two thirds of its revenue in the Americas and the balance across other regions dominated by Europe, Japan and Australia. Recent developments and acquisitions have focused on digital health as ResMed is aiming to differentiate itself through the provision of clinical data for use by the patient, medical care advisor and payer in the out-of-hospital setting.
Sector
Healthcare
Industry
Medical Instruments & Supplies
Stock Style Box
Mid Growth
Total Number of Employees
10,140
Website
https://www.resmed.com

Competitors

Valuation

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Metric
RMD
FPH
CTEC
Price/Earnings (Normalized)
 30.0857.8124.51
Price/Book Value
 6.928.824.40
Price/Sales
 7.029.073.39
Price/Cash Flow
 25.2639.4819.47
Price/Earnings
RMD
FPH
CTEC

Financial Strength

Metric
RMD
FPH
CTEC
Quick Ratio
 1.321.060.79
Current Ratio
 3.042.541.62
Interest Coverage
 22.6325.773.21
Quick Ratio
RMD
FPH
CTEC

Profitability

Metric
RMD
FPH
CTEC
Return on Assets (Normalized)
 15.75%12.48%7.44%
Return on Equity (Normalized)
 24.94%16.75%16.69%
Return on Invested Capital (Normalized)
 19.33%15.46%10.90%
Return on Assets
RMD
FPH
CTEC
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