Does ResMed Inc’s (NYSE:RMD) Past Performance Indicate A Weaker Future?
When ResMed Inc (NYSE:RMD) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well ResMed has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see RMD has performed.
See our latest analysis for ResMed
Was RMD’s recent earnings decline worse than the long-term trend and the industry?
RMD’s trailing twelve-month earnings (from 30 June 2018) of US$316m has declined by -7.8% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -0.7%, indicating the rate at which RMD is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, ResMed has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 11% exceeds the US Medical Equipment industry of 6.8%, indicating ResMed has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for ResMed’s debt level, has declined over the past 3 years from 23% to 22%.
What does this mean?
ResMed’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that face an extended period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. You should continue to research ResMed to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for RMD’s future growth? Take a look at our free research report of analyst consensus for RMD’s outlook.
Financial Health: Are RMD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
