Why shares of ResMed Inc. (CHESS) are printing record highs

ResMed Inc. (CHESS) (ASX:RMD) soars to new 52-week highs following its Q1 earnings report.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Medical device maker ResMed Inc. (CHESS) (ASX: RMD) has performed exceptionally over the last 12 months with the price of its shares soaring 41% on the ASX, hitting a new 52-week high today of $11.16 before closing at $11.11.

Q1 2018 Earnings

Last week, the San Diego based company reported its earnings for the quarter ending 30 September 2017, beating analyst expectations by $0.01 with adjusted EPS coming in at $0.66.

Revenue increased 13% over the same period in 2016 to US$523.7 million (up 11% at constant currency). Revenue in the Americas region excluding Brightree grew 11% to $296.6 million whilst revenue in the markets of Europe, the Middle East, Africa and the Asia Pacific increased 11% to $189.0 million at constant currency.

Sales across Brightree, the company's cloud based software business also rose strongly by 15% to $38.1 million. The company's impressive growth in connected care for medical devices continues with over 6 million patients using the patient management system AirView and over 200,000 diagnostic tests being processed in the cloud thus far.

Foolish takeaway

Australian based analysts at Credit Suisse and Morgans have both updated their price targets for ResMed to $10.40 and $11.76 respectively following last week's earnings result.

The stock is not cheap and currently trades at approximately 29 times trailing earnings, well above its 5-year average of 23. The company has a low dividend yield by ASX standards of about 1.6% with only 54% of earnings paid out as dividends. This leaves a substantial amount of cash flow available for share buybacks or capital expenditure in new products, geographic expansions, or further acquisitions to enhance future growth prospects.

For Australian investors, the company remains a reasonable long term investment due to its position as a global leader competing in a market growing in both the developed world and emerging markets. A Sleep Heart Health Study found 26% of adults have sleep apnea and large markets in Asia (China and India), Eastern Europe and South America remain under penetrated and offer ResMed high growth opportunities in the future.

Motley Fool contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »