Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of ResMed Inc. (ASX:RMD) had a rough day yesterday falling 14% after the company released earnings.

So what: Third-quarter revenue grew 12% to $US314.8 million but fell well short of the $US327.9 million in revenue analysts were expecting. On the bottom line, earnings fell 11% to $US0.33 per share, $US0.02 below estimates.

Now what: A weak U.S. dollar relative to the euro and Australian dollar was blamed for some of the shortfall, but it looks like expectations were much too high. Declining profit is never a good sign, and I would be cautious jumping on shares right now. The stock’s price/earnings multiple of 19 times trailing earnings will look very expensive if the lower earnings trend continues.

Founded in Australia, ResMed is dual listed on NYSE and the ASX. ResMed reports in U.S. dollars.

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