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Why the ResMed share price is printing record highs

Investing in blue-chip Australian shares has been a bit of a mixed picture for Australian investors over the past few years. Leading companies in the mining sector such as Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) have hit 52-week highs on the back of rising commodity prices, while the big banks like Commonwealth Bank of Australia (ASX: CBA) have been touching 52-week lows on the back of multiple problems. 

All of the aforementioned businesses tend to have some cyclicality about them, but a less cyclical business hitting record highs today is sleep therapy giant RESMED/IDR UNRESTR (ASX: RMD). It has a bulletproof record of revenue growth thanks mainly to its dominant position treating sleep apnea in large global addressable markets.

As a result, its shares have nearly tripled in the past five years and ResMed’s CEO, Mick Farrell, is fond of repeating the mantra that the company is only in the first mile of its race to run a marathon.

It is now attempting to move deeper into the digital- or cloud-connected health space, in part as this provides better margins and also because the rich datasets generated by connected healthcare could demonstrate how the company’s preventative treatments for common sleep disorders actually save public healthcare funders (i.e. governments) on patient costs further down the line. 

The scrip traded on the ASX at $16.70 today represents an FX-adjusted, 1/10th interest on its primary listing on the NYSE. Therefore, as the Australian dollar falls, quarterly dividend payments and profits for Australian investors rise as the company reports and pays dividends in US dollars. 

Based on its NYSE share price of US$116.89, the shares trade on 30x analysts’ consensus estimates for earnings per share of US$3.89 in FY20.

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Motley Fool contributor Tom Richardson owns shares of ResMed Inc. The Motley Fool Australia has recommended 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.

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