RMD - ResMed: Asymmetrical Value Opportunity With High Prospect Of Re-Rating

2024-07-03 08:44:13 ET

Summary

• RMD's competitive advantages in the sleep domain are durable, and its underlying business remains strong.
• It looks attractively valued based on future growth opportunities, resilient returns on capital, and potential for multiple expansions.
• A major advantage is the continued business expansion earning >15% on all capital used in operations with minimal reinvestment requirements to maintain its competitive position.

Investment update

Following my last publication on ResMed Inc. (RMD) in August 2022 there have been multiple updates to the investment debate. Chief among these are 1) recent selloff due to concerns on competition from GLP-1 weight loss drugs in sleep apnea, 2) fading tailwinds from the Philips CPAP device recall, 3) sharp contraction in earnings multiples from 5-year averages, despite 4) RMD's superb fundamentals remaining intact....

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