Why Resmed’s 63% gain looks small

Resmed’s (ASX: RMD) stellar run for the last financial year has highlighted it as one of the most promising developers and manufacturers of medical products on the market.

Resmed’s purpose is to develope products for the treatment and management of respiratory disorders, with a key focus on sleep apnea – an increasingly common sleep disorder. Whilst the company has solidified its position as a global leader in its industry, it has delivered outstanding results throughout FY12. For the nine months ending March 31, it recognised an incredible $1.1 billion in revenue, measuring 10% greater than the revenue recognised in the nine months ending March 31 of the previous year.

Meanwhile, the company also increased its research and development costs by 8.4%, which is a pleasing sign, showing that it is  working towards developing market-beating products to drive growth well into the future.

Over the financial year, Resmed gave investors a solid 63% return to finish on $5 per share. It has now fallen away marginally to around $4.90, however, stockbroking firm Bell Potter has set its target at $6.00.

Whilst Bell Potter’s outlook on the company is certainly encouraging, it is the long-term potential that Resmed holds that should attract investors. In the long-term, it looks like this company could be worth much more than just $6 as more and more people seek treatment for common respiratory disorders.

Foolish takeaway

Although there are certainly risks involved in investing in this sector, as shareholders in companies such as Pharmaxis (ASX: PXS) would tell you, there are also a number of other Australian companies that have made their impact. Cochlear implantable device manufacturer Cochlear (ASX: COH) and biotechnology group Sirtex Medical (ASX: SRX) are global leaders in their respective fields, and also present as fantastic long-term prospects.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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