Why this broker says ResMed is an ASX 200 share to buy

This blue chip share could be in the buy zone…

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If you’re looking to strengthen your portfolio with some ASX 200 blue chips, you may want to look at ResMed Inc (ASX: RMD) shares.

Why ResMed shares?

ResMed is a global leader in the development, manufacturing, distribution, and marketing of medical devices and cloud-based software applications that diagnose, treat, and manage sleep and respiratory disorders.

These include sleep disordered breathing, chronic obstructive pulmonary disease (COPD), neuromuscular disease, and other chronic diseases.

It has been growing at a consistently solid rate for over two decades and despite battling supply chain disruptions, ResMed has continued its growth in FY 2022. It recently reported 12% increase in third-quarter revenue to US$864.5 million and a 5% lift in operating income to US$234.3 million.

What are brokers saying?

In response to the update, analysts at Citi retained their buy rating with a $35.50 price target. This implies potential upside of 25% for investors over the next 12 months.

Citi is positive on ResMed’s growth outlook and, despite the aforementioned supply issues, still expects it to win a greater market share due to a competitor product recall. It commented:

“RMD cut its additional device guidance in FY22 by $100m to $200-250m due to the difficulty in sourcing semiconductors as it attempts to fill the void left by the Philips recall (whose device sales were ~US$800m pa).

We forecast $225m in extra sales (from US$360m) in FY22 – we expect this to continue in FY23 where we assume ~US$350m (from US$315m) of extra sales. Despite the short-term impact, we continue to expect ResMed will make a permanent 10% market share gain in devices due to the Philips’ recall.”

All in all, with ResMed shares “trading at PE of ~28x FY24E, below historical avg of ~32x,” the broker feels that now is an opportune time to invest.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. 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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