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Is the ResMed share price in the buy zone?

The ResMed Inc. (ASX: RMD) share price has been a strong performer over the last 12 months.

During this time the sleep treatment focused medical device company’s shares have gained a remarkable 84%.

Is it too late to invest?

Despite ResMed’s incredible gain over the last 12 months, I don’t believe it is too late to invest if you’re prepared to make a long term investment.

This is because ResMed is still only scratching at the surface of its massive global market opportunity. Management estimates that there are upwards of 1 billion sleep apnoea sufferers worldwide, with the vast majority of these undiagnosed.

Due to its industry leading technology and wide distribution network, I expect the company to benefit greatly as more and more sufferers are diagnosed over the next decade.

I’m not the only one that thinks that ResMed’s shares are still in the buy zone.

According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted the price target on the company’s shares to $27.50.

Why is Goldman Sachs bullish on ResMed?

Goldman was impressed with ResMed’s first half performance and appears confident its strong form can continue.

The broker pointed to its improving penetration of an under-diagnosed condition, favourable pricing dynamics, its effective portfolio management, and mask re-supply programs as reasons to be positive.

In respect to the pricing dynamics, Goldman believes they are more favourable than at any time through the last decade.

Goldman also notes that ResMed’s valuation is attractive in comparison to healthcare peers Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL)

It said: “Valuation is at all-time highs but RMD still trades well below the ASX-listed HC peer group, despite offering comparable growth and, arguably, with fewer mid-term risks. RMD trades on 24.8x NTM EBITDA for 11% CAGR (2.3x), vs. CSL on 27.7x for +12% (2.3x), COH on 29.0x for 12% (2.4x).”

I agree with Goldman Sachs on this and would be a buyer of its shares today.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. 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.

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