The Resmed CDI (ASX: RMD) share price has dropped around 33% since 2 August 2023. Even before that, the ASX healthcare share had gone through plenty of volatility since May 2021, as we can see on the chart below.
The business uses digital health technologies and cloud-connected medical devices to "transform care for people with sleep apnea, COPD (chronic obstructive pulmonary disease) and other chronic diseases".
Resmed says its out-of-hospital software platforms support professionals and caregivers who help people stay healthy in their homes or care settings of their choice.
The company provides services for consumers and healthcare systems in more than 140 countries.
Why the Resmed share price dip is an opportunity
The fund manager Firetail has provided some interesting commentary on the ASX healthcare share. It noted the company's 2023 fourth-quarter result disappointed the market because the gross profit margin did not rise as expected.
Looking at the numbers for the three months to 30 June 2023 compared to the three months to 30 June 2022, revenue was up 23% to US$1.1 billion although the gross profit margin worsened from 57.1% to 55%.
Considering profitability measures, operating profit rose 8% to US$275.3 million and net profit increased 18% to US$229.7 million.
This quarterly update allowed the business to tell investors about the 12 months to June 2023. During this period, revenue increased 18% to US$4.2 billion, operating profit rose 13% to US$1.1 billion, and net profit grew 15% to US$897.6 million.
Yes, despite profit growth, the Resmed share price has declined.
In this case, the market may be looking at more than just the reported numbers. It may also be looking at the rising prevalence of obesity drugs. One of the major drugs, Wegovy, suggested a 20% reduction in cardiovascular events in a recent study.
Firetail noted a sustained reduction of obesity levels across a large slice of the population "would have some negative impacts on Resmed's business. However, the fund manager said there are "several complexities that are underappreciated".
It believes the recent Resmed share price decline has been "significantly overdone".
Firetrail also noted it believes in healthcare companies with strong market positions and defensive underlying demand drivers, such as Resmed.
Valuation
According to Commsec, the Resmed share price is now valued at 21x FY24's estimated earnings with a possible 1.3% dividend yield.
