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Here's Why You Should Invest in ResMed (RMD) Stock Right Now

Zacks Equity Research

ResMed Inc. RMD continues to see strong sales from Software-as-a-Service (“SaaS”) business as well as new mask products and devices. Steady growth in Brightree service offerings and incremental contribution from the buyouts of MatrixCare and HEALTHCAREfirst are driving the Software-as-a-Service business.

Over the past month, the stock has outperformed its industry. The stock has gained 2% in comparison with the industry’s 0.8% rise and the S&P 500’s 1.5% increase.

This leading designer, manufacturer, as well as a distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing and other respiratory disorders has a market cap of $14.90 billion.

With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.


What’s Working in Favor of the Stock?

Buyouts to Boost SaaS Business

ResMed has been continuously opting for buyouts to boost revenues from SaaS business. The company witnessed a 63.3% rise in revenues from the SaaS business in the fiscal second quarter on consistently growing Brightree service offerings and incremental contributions from the MatrixCare and HEALTHCAREfirst buyouts.

Notably, ResMed had completed the acquisition of MatrixCare in November 2018. MatrixCare’s offerings include point of care, lead and referral management, claims processing plus payroll and nutrition management, among others. According to ResMed, this buyout will enhance its ability to improve patient transitions of care and provider efficiencies.

This apart, ResMed acquired Apacheta Corporation, a cloud-based Software as a Service provider offering mobile applications through Brightree. ResMed expects to accelerate growth within its core Brightree software business through this buyout.

Increased Focus on International Markets

ResMed continues to invest and expand its presence in high-growth markets like China, South Korea, India, Brazil and many countries in Eastern Europe. Interestingly, in each of these regions, ResMed is implementing long-term strategies to improve quality of patient life for the purpose of delivering better patient outcomes and reduce overall system healthcare costs in every country. ResMed is also currently focusing on consolidating its strong presence in Europe with respect to its life support ventilation solutions and non-invasive ventilation solutions for chronic obstructive pulmonary disease and neuromuscular disease.

In the second quarter of fiscal 2019, revenues from the combined Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) region registered 1% growth at constant exchange rate (CER) from a year ago.

Increasing Opportunities in New Markets

The third growth horizon of ResMed’s three-pronged growth strategy requires preparing a portfolio to exploit opportunities in new markets, including clinical adjacencies such as atrial fibrillation, heart failure with preserved ejection fraction, asthma, chronic disease management as well as sleep health and wellness. Another key area is ResMed’s work on chronic disease management algorithms, including population health models, health care analytics, care co-ordination and SaaS models for home health, home nursing and hospice. In this area, the company is seeing steady growth in Brightree service offerings and incremental contribution from the buyouts of MatrixCare and HEALTHCAREfirst.

Which Way Are Estimates Treading?

For the current quarter, the Zacks Consensus Estimate for earnings is pegged at 84 cents, reflecting a year-over-year decline of 8.7%. The same for revenues stands at $663.5 million, mirroring a 12.2% improvement year over year.

For fiscal 2019, the Zacks Consensus Estimate for earnings is at $3.55, reflecting 0.6% year-over-year growth. The same for revenues stands at $2.60 billion, indicating a rise of 11%.

Other Key Picks

Other top-ranked stocks in the broader medical space are Penumbra, Inc. PEN, Amedisys, Inc. AMED and Hologic, Inc. HOLX.

Penumbra’s long-term earnings growth rate is expected at 20.9%. The stock carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amedisys’ long-term earnings growth rate is projected at 19.8%. The stock carries a Zacks Rank #2.

Hologic’s long-term earnings growth rate is estimated at 8.9%. The stock also carries a Zacks Rank of 2.

Zacks' Top 10 Stocks for 2019

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