It hasn't been a great morning session for ResMed investors, who have watched their shares sink by -1.8% to a price of $138.6. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
ResMed's Valuation Is in Line With Its Sector Averages:
ResMed Inc. develops, manufactures, distributes, and markets medical devices and cloud-based software applications for the healthcare markets. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, ResMed has a trailing 12 month P/E ratio of 22.8 and a P/B ratio of 4.94.
ResMed's PEG ratio is 1.78, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company Has a Positive Net Current Asset Value:
| 2017-08-04 | 2018-08-17 | 2019-08-08 | 2020-08-13 | 2021-08-17 | 2022-08-12 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $2,067 | $2,340 | $2,607 | $2,957 | $3,197 | $3,578 |
| Gross Margins | 57.0% | 57.0% | 56.0% | 57.0% | 57.0% | 56.0% |
| Operating Margins | 21% | 24% | 23% | 27% | 28% | 28% |
| Net Margins | 17.0% | 13.0% | 16.0% | 21.0% | 15.0% | 22.0% |
| Net Income (MM) | $342 | $316 | $405 | $622 | $475 | $779 |
| Net Interest Expense (MM) | -$11 | -$12 | -$34 | -$39 | -$24 | -$22 |
| Depreciation & Amort. (MM) | -$112 | -$120 | -$151 | -$155 | -$157 | -$160 |
| Earnings Per Share | $2.4 | $2.19 | $2.8 | $4.27 | $3.24 | $5.3 |
| EPS Growth | n/a | -8.75% | 27.85% | 52.5% | -24.12% | 63.58% |
| Diluted Shares (MM) | 142 | 144 | 144 | 146 | 146 | 147 |
| Free Cash Flow (MM) | $486 | $576 | $536 | $908 | $854 | $507 |
| Capital Expenditures (MM) | -$71 | -$71 | -$77 | -$106 | -$117 | -$156 |
| Net Current Assets (MM) | $136 | $61 | -$890 | -$567 | -$268 | $196 |
| Long Term Debt (MM) | $1,079 | $270 | $1,259 | $1,164 | $643 | $765 |
| Net Debt / EBITDA | 0.47 | 0.14 | 1.51 | 0.74 | 0.34 | 0.43 |
ResMed has strong margins with a stable trend and an excellent current ratio. Additionally, the company's financial statements display low leverage and a strong EPS growth trend. However, the firm has slimmer gross margins than its peers. Finally, we note that ResMed has weak revenue growth and a flat capital expenditure trend and irregular cash flows.
