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Is it too late to buy ResMed shares?

ResMed Inc. (ASX: RMD) has been a star performer on the S&P/ASX 200 Index (ASX: XJO) over the past 12 months, with its share price up by 64%. With such a strong rise, do ResMed shares still offer investors value today?

ResMed growth story continues

ResMed continues to see strong improvement in its profit margins, driven by benefits from product mix changes and manufacturing and procurement efficiencies. Pleasingly, this indicates increasing economies of scale as the company further entrenches its already strong position in this niche of the market.

For the three months ended December 31, ResMed reported revenue growth of 13% to US$736.2 million. This took its half-year revenue ending December 2019 to US$1,417.2 million, which was up 14% over the prior corresponding period.

ResMed reported net operating profit growth of 26% to US$197.8 million for the second quarter, while for the first half, net operating profit was up by 22% coming in at US$368.9 million.

ResMed continues to see strong customer demand for its new products, particularly in masks and accessories. The potential market for sleep apnoea remains massive. It is estimated that there are one billion people impacted by sleep apnoea worldwide, and more than 80% of cases globally are actually undiagnosed.

ResMed’s ‘competitive moat’ against other providers entering the market and attempting to gain market share is widening even further due to the reinvestment of a high proportion of its profits into research and development. It also plans to move further into the cloud-connected health space.

Less impacted than its peers in current ASX slide

ASX 200 healthcare shares such as Cochlear Limited (ASX: COH)Ramsay Health Care Limited (ASX: RHC) and Pro Medicus Limited (ASX: PME) have been hit quite hard in the current market crash, which has seen the Index fall more than 20% into a bear market.

ResMed shares have fared better in comparison. Although the ResMed share price has suffered falls, it has been relatively less impacted with a 10% fall from 20 February up until trading began today.

I think there are two key reasons for this this. Firstly, ResMed is seen as a very solid and stable share, with an entrenched market position and good growth prospects. Secondly, ResMed is likely perceived by investors as a company that will have a relatively low impact from the implications of the coronavirus.

Are ResMed shares a buy?

Despite the fact that the ResMed share price has delivered strong growth over the past 12 months, I still believe that ResMed offers investors good value today.

ResMed’s growth potential over the next 12 to 24 months, in my view, still remains strong and with a correction to its share price recently, I think this adds to the appeal.

The company is also proving to be very resilient to all the current market turmoil, which could be an important asset if this volatility stays around over the next few months.

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Phil Harpur owns shares of Cochlear Ltd. and ResMed Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Cochlear Ltd., Ramsay Health Care Limited, 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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