ResMed’s stock price has taken a beating over the past six months, shedding 26.3% of its value and falling to $185.29 per share. This may have investors wondering how to approach the situation.
Following the drawdown, is now the time to buy RMD? Find out in our full research report, it’s free.
Why Do Investors Watch RMD Stock?
Founded in 1989 to address the then-underdiagnosed condition of sleep apnea, ResMed (NYSE: RMD) develops cloud-connected medical devices and software solutions that treat sleep apnea, COPD, and other respiratory disorders for home and clinical use.
Three Positive Attributes:
1. Constant Currency Revenue Drives Growth
We can better understand Patient Monitoring companies by analyzing their constant currency revenue. This metric excludes currency movements, which are outside of ResMed’s control and are not indicative of underlying demand.
Over the last two years, ResMed’s constant currency revenue averaged 9.1% year-on-year growth. This performance was solid and shows it can expand steadily on a global scale regardless of the macroeconomic environment. 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
ResMed’s EPS grew at 15.2% compounded annual growth rate over the last five years, higher than its 12.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, ResMed’s margin expanded by 21.4 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. ResMed’s free cash flow margin for the trailing 12 months was 31.7%.
Final Judgment
ResMed possesses several positive attributes. With the recent decline, the stock trades at 15.6× forward P/E (or $185.29 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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