ResMed may be overvalued with mixed growth prospects, but the 9 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $219.0 to $280.0 per share, for an average of $255.78. At today's price of $238.24, ResMed is trading -6.86% away from its average target price, suggesting there is an analyst consensus of some upside potential.
ResMed Inc. develops, manufactures, distributes, and markets medical devices and cloud-based software applications for the healthcare markets. Based in San Diego, CA, the large-cap Health Care company has 8,160 full time employees. ResMed has offered a 0.8% dividend yield over the last 12 months.
ResMed has a trailing twelve month P/E ratio of 43.2, compared to an average of 24.45 for the Health Care sector. Based on its EPS guidance of 7.28, the company has a forward P/E ratio of 32.7. Based on the 21.1% compound average growth rate of ResMed's historical and projected earnings per share, the company's PEG ratio is 1.87. This EPS growth rate is likely not sustainable, so will substitute the broader market's 5-year projected EPS growth rate of 10.3%, which gives us a PEG ratio of 3.82. This suggests that these shares are overvalued.
Furthermore, ResMed is likely overvalued compared to its book value, since its P/B ratio of 9.4 is higher than the sector average of 4.16. The company's shares are currently trading 400.3% above their Graham number, implying that they are overvalued in terms of earnings and book value.
If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows. Furthermore, ResMed has wide margins as you can see in the financial summary below.
| 2019-06-30 | 2020-06-30 | 2021-06-30 | 2022-06-30 | |
|---|---|---|---|---|
| Revenue (MM) | $2,607 | $2,957 | $3,197 | $3,578 |
| Revenue Growth | n/a | 13.44% | 8.11% | 11.93% |
| Gross Margins | 59.0% | 58.1% | 57.5% | 56.6% |
| Gross Margins Growth | n/a | -1.53% | -1.03% | -1.57% |
| Operating Margins | 24.4% | 27.4% | 28.5% | 28.0% |
| Operating Margins Growth | n/a | 12.3% | 4.01% | -1.75% |
| Net Margins | 15.52% | 21.02% | 14.84% | 21.78% |
| Net Margins Growth | n/a | 35.44% | -29.4% | 46.77% |
| Earnings Per Share | $2.8 | $4.27 | $3.24 | $5.52 |
| EPS Growth | n/a | 52.5% | -24.12% | 70.37% |
| Diluted Shares (MM) | 144 | 146 | 146 | 147 |
| Free Cash Flow (MM) | $382 | $696 | $620 | $195 |
| FCF Growth | n/a | 82.42% | -10.98% | -68.53% |
| Capital Expenditures (MM) | -$77 | -$106 | -$117 | -$156 |
| Net Debt / EBITDA | 1.6 | 0.77 | 0.35 | 0.44 |
