ResMed Inc (RMD): A Deep Dive into Financial Metrics and Competitive Strengths
ResMed Inc (NYSE:RMD) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $143.09, ResMed Inc has witnessed a daily gain of 3.47%, marked against a three-month change of -33.2%. A thorough analysis, underlined by the GF Score, suggests that ResMed Inc is well-positioned for substantial growth in the near future.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
ResMed Inc's GF Score components are as follows:
Financial strength rank: 7/10
Profitability rank: 10/10
Growth rank: 10/10
GF Value rank: 8/10
Momentum rank: 4/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high profitability rank and growth rank, and a slightly lower momentum rank, GuruFocus assigned ResMed Inc the GF Score of 95 out of 100, which signals the highest outperformance potential.
ResMed Inc Business Overview
ResMed Inc, with a market cap of $21.04 billion, is one of the largest respiratory care device companies globally, primarily developing and supplying flow generators, masks and accessories for the treatment of sleep apnea. The company's sales stand at $4.22 billion with an operating margin of 27.26%. Increasing diagnosis of sleep apnea combined with ageing populations and increasing prevalence of obesity is resulting in a structurally growing market. The company earns roughly two thirds of its revenue in the Americas and the balance across other regions dominated by Europe, Japan and Australia. Recent developments and acquisitions have focused on digital health as ResMed is aiming to differentiate itself through the provision of clinical data for use by the patient, medical care advisor and payer in the out-of-hospital setting.
Financial Strength Analysis
According to the Financial Strength rating, ResMed Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for ResMed Inc stands impressively at 24.3, underscoring its strong capability to cover its interest obligations. With an Altman Z-Score of 6.98, ResMed Inc exhibits a strong defense against financial distress. With a favorable Debt-to-Revenue ratio of 0.37, ResMed Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows ResMed Inc's impressive standing among its peers in generating profit. ResMed Inc Operating Margin has increased (13.94%) over the past five years, as shown by the following data: 2019: 24.40; 2020: 27.36; 2021: 28.54; 2022: 28.01; 2023: 27.28. ResMed Inc's strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, ResMed Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 12.2%, which outperforms better than 63.2% of 731 companies in the Medical Devices & Instruments industry. Moreover, ResMed Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 10.4, and the rate over the past five years is 15.2. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given ResMed Inc's strong financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. This analysis suggests that ResMed Inc is a promising investment opportunity for value investors seeking robust growth and financial stability.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
