Shares in ResMed Inc. (CHESS) (ASX: RMD) printed a new record high this morning after the group revealed details over its latest continuous positive airway pressure (CPAP) full face mask the AirFit F30 that it claims is the most advanced mask ever released in its field.
Investors on Wall Street sent the U.S. scrip 2% higher to a record US$114.08 overnight, with the chess depositary instruments (CDIs) traded on the ASX hitting a record $15.89 this morning.
For the Sydney founded but San Francisco headquartered company the CDIs represent a 1/10th interest in the primary U.S. scrip and roughly track their price adjusted for the spot USD/AUD exchange rate.
Today for example the CDIs are equal to the $US114.08 price divided by the spot exchange rate of U.S. 71.9 cents, which equals $A15.87.
Therefore a falling Australian dollar is a benefit for CDI holders alongside the fact that quarterly dividend payments are exchanged from U.S. dollars into Australian dollars at prevailing spot rates.
Notably though ResMed is also a beneficiary of a weaker U.S. dollar as it reports in U.S. dollars, but earns a significant amount of revenue and earnings in Euros or other ex-US dollar currencies.
As such investors shouldn’t place too much emphasis on expected currency movements in terms of the investment case.
Analysts at Goldmans value the CDIs at $16.70 based on their positive assessments of its products’ competitive position, the public sector reimbursement environment in the U.S, and the company’s potential to grow revenues faster than costs over the short term at least.
ResMed stock is up nearly 200% over the past 5 years despite the business facing some headwinds in terms of reimbursement levels in its core U.S. market, a serious tax dispute with the ATO in Australia, and a bitter and costly ongoing legal patent dispute with major rival Fisher & Paykel Healthcare Ltd (ASX: FPH).
Despite all this the group is now worth around $22 billion at almost twice the size of Cochlear Ltd (ASX: COH).
Thanks to ResMed’s founder led nature, balance sheet strength and reinvestment in research and development for long term growth it looks to remain a good bet for growth-oriented investors.
However, I would look to dollar cost average into the business over a series of trades over at least a year as it’s currently trading on historically high earnings multiples.
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The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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 Scott Phillips.