Medical device maker ResMed Inc. (CHESS) (ASX: RMD) has performed exceptionally over the last 12 months with the price of its shares soaring 41% on the ASX, hitting a new 52-week high today of $11.16 before closing at $11.11.
Q1 2018 Earnings
Last week, the San Diego based company reported its earnings for the quarter ending 30 September 2017, beating analyst expectations by $0.01 with adjusted EPS coming in at $0.66.
Revenue increased 13% over the same period in 2016 to US$523.7 million (up 11% at constant currency). Revenue in the Americas region excluding Brightree grew 11% to $296.6 million whilst revenue in the markets of Europe, the Middle East, Africa and the Asia Pacific increased 11% to $189.0 million at constant currency.
Sales across Brightree, the company's cloud based software business also rose strongly by 15% to $38.1 million. The company's impressive growth in connected care for medical devices continues with over 6 million patients using the patient management system AirView and over 200,000 diagnostic tests being processed in the cloud thus far.
Foolish takeaway
Australian based analysts at Credit Suisse and Morgans have both updated their price targets for ResMed to $10.40 and $11.76 respectively following last week's earnings result.
The stock is not cheap and currently trades at approximately 29 times trailing earnings, well above its 5-year average of 23. The company has a low dividend yield by ASX standards of about 1.6% with only 54% of earnings paid out as dividends. This leaves a substantial amount of cash flow available for share buybacks or capital expenditure in new products, geographic expansions, or further acquisitions to enhance future growth prospects.
For Australian investors, the company remains a reasonable long term investment due to its position as a global leader competing in a market growing in both the developed world and emerging markets. A Sleep Heart Health Study found 26% of adults have sleep apnea and large markets in Asia (China and India), Eastern Europe and South America remain under penetrated and offer ResMed high growth opportunities in the future.
