ResMed Inc
Trading at Higher Level: ResMed Inc (ASX: RMD), based in California, the United States, is a health care company. The company provides innovative solutions for the treatment of the people and help them keep out of the hospital. It allows people to live a healthier and high-quality life. Its medical devices which can be connected over the cloud transform care for people with diseases such as Chronic Obstructive Pulmonary Disease (COPD), Sleep Apnea, etc. It also has an out-of-hospital software platformhelps people to stay healthy at home. It is catering to people worldwide in more than 120 countries providing better care. The company will be releasing its results for the second quarter of FY19 on 24 January 2019 after the NYSE market closes.
Over the past three years, the margins of the company have marginally inclined and are above the industry medians. During 1Q19, the company reported an EBITDA, Operating, and Net margins of 30.0%, 24.5%, and 18.1% respectively which were above the industry median of 17.3%, 10.9%, and 5.9% respectively. Similarly, the annual margin of aforesaid metrics was also above the industry medians. The company is able to generate a better return to the shareholders which is visible through its ROE of 5.4% in 1Q19 as compared to the industry median of 2.0%. The ROE has improved over the past 5 years. The asset turnover ratio reported at 0.19x was marginally above the industry median of 0.17x, showing that the company along with the industry is unable to fully utilize its assets to generate the revenue. The company has ~1.42 billion shares outstanding with the market cap of ~$22.7 billion, an annual dividend yield of 0.85%, and a beta of 0.65x as of January 14, 2019 (five-years- Monthly basis). The company has recently paid a dividend of US $0.37 per share for 1Q19.
6-Months chart (Source: Thomson Reuters)
Over the past 1 year, RMD’s stock price has soared by 44.99%and is trading at a high trailing 12-months P/E of 53.23x as compared to the healthcare industry trailing 12-months P/E of -9.6x showing that the stock is extremely overvalued. Today, the stock was marginally down by 0.377% as compared to the previous close, currently trading at the price of level $15.860 close to its resistance level at $16.040. The stock is positioned near to the upper band of the Bollinger band and is in the unfavourable position of the Relative Strength Index (RSI). We, therefore, maintain our “Expensive” recommendation on the stock at the current market price of $15.860, considering aforesaid facts and current trading scenario.
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