One of the standouts of today's afternoon trading session was ResMed, which logged a 2.4% performance and outperformed the S&P 500 by 6.0%. The Medical Instruments & Supplies stock is now trading at $238.04 per share and may still have upside potential because it is still -11.63% under its average target price of $269.38. Analysts have set target prices ranging from $195.0 to $295.0 dollars per share, and have given the stock an average rating of buy.
We can use ResMed's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since RMD's short interest is 7.6%, the market sentiment is mixed on this stock.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of ResMed, institutional investors own 62.8% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in RMD, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is mixed market sentiment on ResMed because its an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and an average number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are RMD's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) |
|---|---|---|---|
| 2024 | 1,401,260 | 99,460 | 1,301,800 |
| 2023 | 693,299 | 119,672 | 573,627 |
| 2022 | 351,147 | 134,835 | 216,312 |
| 2021 | 736,718 | 102,712 | 634,006 |
| 2020 | 802,255 | 95,330 | 706,925 |
| 2019 | 459,051 | 68,710 | 390,341 |
