Opinions
Colin Fisher
ResMed Inc.
RMD-N
WATCH
Mar 16, 2016
Stock price when the opinion was issued
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Premium contentRMD provides cloud based digital medical devices to assist with sleep and respiratory monitoring and treatment — a steady and reliable business model. It trades at 26x earnings and supports a respectable ROE of 25%. We like that cash reserves are growing, while debt is retired and shares bought back. We recommend setting a stop-loss at $190, looking to achieve $271 — upside potential of 22%. Yield 1.0%
(Analysts’ price target is $271.71)Premium contentPremium contentRMD has been showing positive momentum recently, it is nearing in on its all-time highs, and forward margin expansion is expected to be quite positive. Analyst estimates are trending higher, its margins have been growing, and it generats strong free cash flow, which is partly used for dividends, buybacks, and growing the balance sheet. It is trading at a reasonable valuation of 25X forward earnings, and it has structural tailwinds. We would be comfortable buying the name here today for a long-term hold.
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Some of the shareholders are super bright buys. They have a good shareholder base. They had a bit of a failure to launch. They don’t have a long shelf life. You have a more activist board that are shaking the tree. It is going to have prospects. He wants to see something happen with their capital.