RMD share price in focus
Founded in 1989 by Peter Farrell in Australia, ResMed is now headquartered in San Diego, California. The company specializes in medical equipment, offering cloud-connectable continuous positive airway pressure (CPAP) machines to treat obstructive sleep apnea (OSA). Although ResMed is based in the US, its shares are listed on both the NYSE and the ASX.
With over 10,000 employees and operations in more than 140 countries, ResMed has two main business units: Sleep and Respiratory Care, and Software as a Service (SaaS). In the Sleep and Respiratory Care unit, ResMed provides top-of-the-line CPAP machines for sleep apnea, along with non-invasive and invasive ventilation solutions for life-support patients. In the SaaS unit, the company offers software that supports durable medical equipment (DME/HME), which plays a key role in out-of-hospital care.
ResMed’s extensive digital health network, powered by its cloud-connected devices, enables the company to use its industry-leading hardware (such as masks and humidifiers) and SaaS data to generate valuable insights, enhance patient outcomes, and lower overall healthcare costs.
The key metrics
For investors, RMD’s revenue, gross margin, and profit can provide valuable insights into the company’s performance.
RMD last reported an annual revenue of $4,685m with a compound annual growth rate (CAGR) over the last 3 years of 13.6% per year. While the absolute number is useful to know, the key point is the trend. We want to see a consistent, upward trajectory in revenue.
Gross margin measures profitability before taking into account overhead costs – it reflects the strength of the company’s core business operations. RMD’s latest reported gross margin stood at 57.4%.
Finally, the number we’re most interested in – profit. Last financial year Resmed CDI reported a profit of $1,021m. Three years ago they made a profit of $475m, representing a CAGR of 29.1%.
Financial health of RMD shares
Profitability is important, but equally important is the capital health of the company. We want to know about the company’s leverage, their capacity to pay debts, and their ability to generate a return on assets. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.
Resmed CDI’s net debt currently sits at -$624m. A negative value here indicates that the company has more assets than debt, suggesting RMD is in a stong financial position.
Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity – this is also known as leverage. RMD has more equity than debt, with a debt/equity ratio of 18.0%.
Finally, we can look at the return on equity (ROE). The ROE tells us how efficiently the company is turning shareholder equity into profit – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. RMD generated an ROE of 22.7% in FY24.
What to make of RMD shares?
With strong revenue growth over the last 3 years, profits trending upwards, and a solid ROE, the RMD share price could be one worth watching in 2025.
Please keep in mind this should only be the beginning of your research. It’s important to get a good grasp of the company’s financials and compare it to its peers. It’s also important to make sure the company is priced fairly. To learn more about share price valuation, you can sign up for one of our many free online investing courses.
