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Why the ResMed Inc (CHESS) share price is at another record high

The ResMed Inc (CHESS) share price opened 3% higher this morning to hit a record high of $10.43 as investors warm to its prospects to grow profit margins thanks to a range of new product releases over the past year.

Just recently the sleep apnea and chronic obstructive pulmonary disease (COPD) specialist has released the AirMini, AirFit F20, AirFit N20 and AirTouch F20 new medical devices.

It has also recently acquired cloud-based software-as-a-service patient management and home health business, Brightree, for more than A$1 billion in a margin-boosting move that widens the group’s footprint in the growing digital home health monitoring market.

The move into the software-as-a-service also brings in monthly and annual recurring revenues, which is a good change from the challenge of selling new medical devices every quarter and gives the business the opportunity to boost its credentials as a tech-driven medical device company.

ResMed’s potential is something I’ve covered multiple times over a last three-year period that has seen the stock nearly double in value. But this is no flash-in-the-pan small-cap that could collapse in half over a single month, as ResMed retains a strong growth outlook as its investments in research and development continue to stand the business in good stead over the long term.

Wall Street’s analysts are now also increasingly waking up to the firm’s good management and long-term potential, with its primary NYSE-listed scrip closing at US$78.91. The stock additionally offers ASX investors direct exposure to a weaker Australian dollar which is another reason why I’ve repeatedly suggested it looked a good stock to own over the last three years.

ResMed shares now trade on around 27x FX-adjusted annualised earnings per share, which is on the high side but still cheaper than peers Cochlear Ltd (ASX: COH) and CSL Limited (ASX: CSL) for Australian investors with limited choices in searching for companies with genuine bottom draw growth potential.

I would look to build a position in the company by spacing out my investments over six-month time periods in order to dollar cost average into the business.

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