Welcome to this ASX World Cup group game between CSL Limited (ASX: CSL) and ResMed. Inc (CHESS) (ASX: RMD). It might be the healthcare group, but given the strength of the teams also including Ramsay Health Care Limited (ASX: RHC) and Sonic Healthcare Limited (ASX: SHL) it looks more like the group of death. Whoever gets out of this group could present a strong challenge for the tournament winner.
Pre-match commentary and stats
Blood plasma product manufacturer CSL has been a star performer over the past five years, up 113.79% compared to the S&P/ASX 200 Index's (INDEXASX:XJO) handy 38.9% rise. Meanwhile sleep disorder business ResMed has risen around 78% since June 2012. But which is the stronger outfit on current valuations?
| CSL Limited | ResMed | |
| Code | ASX:CSL | ASX:RMD |
| Recent Price | $67.45 | $5.52 |
| Market Capitalisation | $32.25 billion | $7.8 billion |
| Dividend Yield / Franking | 1.8% | 0% | 1.7% | 0% |
| Projected P/E ratio 2015 | 19.4 | 19.2 |
| Price-Book ratio | 10.14 | 4.6 |
Source: Thomson Consensus Estimates
The match kicks off with both teams looking quite evenly matched in terms of forward price-earnings ratios suggesting the market rates both these businesses for their potential to keep on growing. Both have an almost perfect track record of steadily growing revenues, but CSL's greater diversity of geographic sales reach means it takes an early lead 1-0. ResMed is heavily reliant on the U.S market, where it has faced challenging conditions recently.
Half time and it's 1-0 to CSL.
Central to both businesses strong recent performance has been gross margin expansion ahead of expectations, ResMed benefits from a gradually falling Australian dollar and CSL from the operating leverage provided by the critical nature of its life-saving blood plasma products. CSL's oligopolistic position is hard to beat and it takes a 2-0 lead.
Both businesses also have experienced management teams and strong track records of innovation and new product delivery. However, ResMed's conveyor belt of new products and strong commitment to research demonstrated by its reported attempts to recruit the best science graduates from Australian universities means chief executive Mick Farrell scores a Tim Cahill like volley to pull one goal back, but it's not enough and CSL runs out a 2-1 winner! If you prefer your stocks to deliver more income, then there's one we know with…
