Is the ResMed (ASX:RMD) share price good value?

Up 18% in 12 months… can ResMed keep climbing?
The post Is the ResMed (ASX:RMD) share price good value? appeared first on The Motley Fool Australia. –

The ResMed Inc (ASX: RMD) share price has been a positive performer over the last 12 months.

Since this time last year, the sleep treatment focused medical device company’s shares have risen a sizeable 18%.

Is it too to buy ResMed shares?

According to one leading broker, the ResMed share price could be nearing its full value.

A note out of Goldman Sachs this morning reveals that its analysts have retained their neutral rating and $28.40 price target on the company’s shares.

This compares to the latest ResMed share price of $27.15.

What did the broker say?

The broker notes that ResMed recently presented at its Annual Global Healthcare Conference.

At the event, ResMed’s COO, Rob Douglas, spoke positively about recent trading and a new product launch, which could capitalise on competitor challenges.

However, Mr Douglas also revealed that supply chain issues could put pressure on its near term costs.

Current trading

Goldman commented: “With vaccine roll-out progressing well in most key markets, RMD sees scope to reach pre-Covid-19 levels of new patient starts within the next two quarters. In our view, evidence of this recovery is the key factor to support a sustained re-rating in the stock.”

“Management acknowledges that the cumulative impact of fewer diagnoses through the trailing quarters is now a headwind to mask growth, but believes this will normalise relatively quickly as diagnoses continue to recover (we estimate c.20% of mask sales are derived through new patient starts).”

Cost pressures

Commenting on cost pressures, Goldman said: “In line with many other medical device manufacturers, RMD is currently encountering various pressures across its supply chain (most notably the availability and cost of freight). One of the more attractive features of the business over the last decade has been the consistent ability to grow revenue ahead of costs. With cost growth now increasing and revenues not yet normalised we see scope for near-term margin pressure.”

Though, the broker points out that “management was keen to emphasise the target to continue to deliver positive operating leverage through the mid/longer-term.”

New product launch

Goldman Sachs also notes that the launch of its new flow generator, AirSense 11, could be a boost to sales.

It explained: “Historically, a new launch has tended to precede a modest uptick in device sales growth; generally due to more favourable pricing on the legacy portfolio. Following the €250m provision recently announced by Philips for a corrective field action for its DreamStation1, there has been some debate about the extent to which RMD can capitalise. Whilst certain customers have contacted them to enquire around their scope to backfill, RMD was keen to emphasise that their primary focus is ensuring the best outcomes for patients overall.”

Neutral rating

While Goldman Sachs remains positive on the long term, it isn’t recommending the ResMed share price as a buy just yet.

It concluded: “We retain a positive view on mid-/long-term fundamentals, but maintain a Neutral rating RMD on short-term challenges and valuation grounds.”

The post Is the ResMed (ASX:RMD) share price good value? appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

5 things to watch on the ASX 200 on Wednesday

3 highly rated ASX growth shares analysts love

2 blue chip ASX shares rated as buys

2 blue chip ASX 200 shares analysts love

2 ASX 200 shares to buy for growth

James Mickleboro does not own any shares 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 Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!