ResMed Inc (ASX: RMD) shares are having a positive finish to the week.
Shares in the sleep technology giant are up 2% to around $36.15 on Friday, following the release of the company's first-quarter results.
But are the results good enough to make ResMed shares a buy at current levels?
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What did ResMed report?
According to its ASX announcement, ResMed delivered a solid start to FY27, reporting a 6% increase in revenue to US$1.41 billion for the first quarter.
On a core constant currency basis, revenue growth was slightly stronger at 7%.
Demand for its sleep and breathing health products remained healthy, with global sleep device revenue increasing 9% and masks and other products growing 10%. I think these are encouraging numbers.
There was also good news on profitability. The company's adjusted gross margin improved by 50 basis points to 62.5%, helped by ongoing productivity improvements.
This contributed to a 14% increase in adjusted earnings per share (EPS), comfortably ahead of revenue growth.
As for the outlook, management maintained its FY27 guidance. ResMed continues to expect reported revenue of US$5.75 billion to US$5.85 billion, with core constant currency revenue growth of 5% to 7%. Its adjusted earnings guidance was also left unchanged.
I think ResMed's first-quarter performance provides a solid start towards achieving those targets.
Would I buy ResMed shares?
I am positive on ResMed's long-term prospects, and today's results have reinforced that view.
The company has an excellent position in the global sleep health market, supported by its established brand, extensive product range, and continued investment in innovation.
Importantly, there is still a substantial opportunity to grow. Millions of people around the world are living with undiagnosed or untreated obstructive sleep apnoea, and I expect awareness and access to treatment to improve over time.
ResMed is well placed to benefit from this trend, especially as it continues expanding internationally and developing new products.
I also like the company's focus on improving efficiency, which could allow earnings to grow faster than revenue over the coming years.
And what about its valuation? Based on CommSec consensus forecasts at 30 October, ResMed shares are trading on a forward price-to-earnings (P/E) ratio of approximately 21.3 times FY27 earnings.
That reduces to 19.4 times for FY28, then to 17.5 times for FY29. It is also possible that consensus EPS estimates could change for the better following the company's encouraging start to the year, lowering these multiples a touch.
Of course, investors should keep in mind that this valuation assumes ResMed continues delivering earnings growth. Any slowdown or pressure on profitability could weigh on its share price.
Nevertheless, I think the current multiples look reasonable for a business with ResMed's market position and long-term growth opportunities.
Foolish takeaway
Today's results have given me another reason to feel confident about ResMed shares.
The company continues to grow, its profitability is improving, and there is still a substantial global market for its products.
At around $36.15, I think ResMed shares offer good value for long-term investors. In light of this, I would be happy to buy and give the company plenty of time to grow.
