ResMed Inc (ASX: RMD) shares are up 0.35% today after reporting its FY18 result.
Although Michael Wayne from Medallion Financial is neutral on ResMed, he thinks that the market is underappreciating ResMed in regards to the shift towards remote monitoring technology.
He noted in a Livewire article that the market for ResMed is both competitive and compelling. According to the US National Heart Blood and Lung Institutes, 12 million people suffer from sleep apnoea, but only four million people have been diagnosed.
However, competition is rising from the likes of Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), which is putting the ResMed gross margin under pressure. Declining margins can be a big dampener on profit growth even if revenues are rising.
To counter this, Mr Wayne said that ResMed is a clear leader in the remote monitoring technology space. He said "ResMed now has more than 5 million cloud-connected patient devices helping to develop a Software as a Service (SaaS) business with an accretive recurring revenue stream."
There are many benefits to come from this including improving the medical professional and patient relationship, accuracy of data collection, diagnosis in a less invasive way and improving the willingness of the patient to seek help.
As I mentioned above, Mr Wayne is neutral on ResMed and the result today was in line with expectations, with revenue growing by 13% and profit rising by 8%.
At 30x FY19's estimated earnings I'm not sure it's an obvious buy. If the gross margin continues to fall then that could be a worry for long-term profit growth.
