Every now and then, the market serves up a great business at a very attractive price.
Right now, I believe ResMed Inc. (ASX: RMD) is one of those opportunities.
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A global health giant hiding in plain sight
ResMed has quietly grown into one of Australia's most successful global healthcare companies. It dominates the market for sleep apnoea devices and masks, and its software platforms support millions of patients and providers worldwide.
And yet, despite that leadership, its shares have only risen by 9% since this time four years ago due largely to concerns about weight-loss drugs. But when you zoom out, the long-term outlook becomes impossible to ignore.
Sleep apnoea is one of the most underdiagnosed medical conditions on the planet, with more than one billion people estimated to suffer from it globally. The vast majority are undiagnosed and untreated. That gives ResMed a total addressable market so large that even modest gains in diagnosis and treatment can fuel years, if not decades, of growth.
Long term opportunity
The market became preoccupied with fears that weight-loss medications could meaningfully reduce sleep apnoea cases. But real-world data has shown that isn't happening. Independent analysts and sleep specialists continue to report that while weight loss helps, it rarely eliminates the condition entirely. In many cases, patients still require ongoing treatment.
At the same time, ResMed has been consistently improving margins through cost efficiencies, manufacturing improvements, and strong demand for its latest devices.
Big potential returns
Despite its world-class fundamentals, ResMed is trading at a sharp discount to what many analysts believe is fair value.
For example, analysts at Citi have a buy rating and $51.00 price target on this Australian stock.
Based on its current share price of $39.31, this implies potential upside of approximately 30% for investors over the next 12 months.
The team at Macquarie isn't far behind with its outperform rating and $49.20 price target, which offers a potential return of 25%.
Investors don't often get a chance to buy a healthcare leader of this calibre at a discount, and they rarely get two chances.
Foolish takeaway
Fast-forward 10 years, and this Australian stock is likely to be even bigger, more technologically advanced, and more profitable than it is today.
The sleep apnoea market is vast, underpenetrated, and growing. ResMed's competitive position is formidable. And the current share price simply doesn't reflect that long-term potential.
