1 Money-Making Stock Investors Are Sleeping On

ResMed might not be a household name for the average investor, but its portfolio of almost 6,000 patents focused on sleep apnea and respiratory care suggest perhaps it should be. The IP forms an economic moat for ResMed in the medical devices industry, which is massive.

One of the key factors attracting investors to ResMed is the booming sleep apnea devices market, which is expected to reach $10.7 billion by 2027, growing at a CAGR of 8.1%.

This sleep apnea enterprise isn’t confined to just to the world of medical devices, either. The company has a substantial foothold in cloud computing, offering software solutions for home medical equipment providers, home health agencies, and senior living facilities so what does all this mean for the share price potential?

Key Points

• ResMed’s near 6,000 patents in sleep apnea and respiratory care provide a strong competitive advantage.
• The sleep apnea market is expected to hit $10.7 billion by 2027. 
• ResMed has 12 consecutive quarters of revenue growth, a 9% increase to $3.6 billion in FY2023, and analysts forecast the stock could reach $220.

ResMed’s Financial Health

Known for its high-quality, patient-centric products, the company has built a global distribution network that spans over 140 countries.

Management has reported positive year-over-year revenue growth for 3 straight years in each and every quarter. Last year, the top brass reported $3.6 billion in revenues, marking a 9% increase from the prior year.

Revenue growth hasn’t all been organic. For instance, the acquisition of MatrixCare, a leading provider of post-acute care software solutions, boosted ResMed’s SaaS offerings and broadened its revenue streams.

In addition, it has expanded into emerging markets where rising incidences of sleep disorders and respiratory diseases are leading to new opportunities for growth.

ResMed’s success is largely driven by strong demand for its sleep and respiratory care products and the expanding SaaS business. Unsurprisingly given the efficiency of the business model, the company’s gross margins stood at over 58%. This margin has supported solid EPS growth, up 12% year-over-year to $4.90 per share.

How High Can ResMed Stock Climb?

Analysts believe ResMed stock has the potential to climb to as high as $220 per share, with six out of eleven analysts recently revising their earnings estimates upward.

The consensus is that ResMed will maintain its profitability and net income expected to grow by up to 15% annually over the next five years, even as revenues go up at a slower 7.8% annual pace.

It can’t be overstated that ResMed is highly profitable, generating nearly $1 billion in net income from $4.5 billion in revenues.

The sleep apnea firm’s strong business model and favorable analyst projections suggest substantial upside potential. With a price-to-earnings ratio of nearly 30x, the valuation might seem high, but projected net income growth of 15% annually over the next five years means it’s not too lofty.

In summary, ResMed offers pristine profitability, solid revenue growth, a healthy balance sheet, and multiple growth levers for future share price appreciation.