ResMed Inc. (RMD), CareFusion Corporation (CFN) – A Healthcare Stock With an Interesting Value Proposition, Part Two

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In the previous section of this article, there was a detailed discussion about ResMed Inc. (NYSE:RMD) and its excellent market position, how well it has been paying dividends (almost always an indication of a mature company), and how its technology is being utilized to treat new indications. In this section, I will conclude with a look at its global growth prospects and its competitors.

Product sales driving growth across geographies for ResMed
One of the most important aspects of ResMed Inc. (NYSE:RMD)’s business strategy is the way it has spread across the globe. The company started out in Australia, so it has a natural edge in that market. However, the company has presence across 20-odd countries and is very prominent in emerging markets like India, China, and Brazil. It also makes more than 40% of its revenue from these markets, including Europe, and about 60% from the U.S.

ResMed Inc. (NYSE:RMD)

Its latest earnings were quite impressive. It posted revenue of $414.6 million in the last reported quarter. The year before, it had $372 million — so that is an 11% increase at constant currency.

Its products, both flow generators and masks, are seeing increasing sales in both home and hospital care. These products are not restricted to the U.S. or Australia alone. ResMed Inc. (NYSE:RMD) has approvals to sell these products in dozens of countries worldwide. Its revenue being spread across geographies reflects that multi-dimensional approach.

Last quarter, it made $230 million from the U.S. and $184 million from the rest of the world. APAC regions showed double-digit growth in revenue. This tells me that the company is evenly spread out. There was 16% growth in flow generators to $104.7 million, and 7% for masks and other products to $125.6 million. This is also indicative of how its portfolio is performing.

The company’s bottom line performed well due to significant growth in operating income, which increased 24% this year. Revenue for the whole year was $1.5 billion, a 12% increase at constant currency. The company has considerable cash reserves of $876 million, and offered a 20% return on equity overall. Broadly, this is a solid company with sound management and strong business approach, and I see long-term benefits from buying into it.

Competitive landscape
Philips Respironics and ResMed Inc. (NYSE:RMD) together comprise nearly 70% of the sleep apnea devices market. Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) is a global player that has been in the emerging markets for decades. ResMed Inc. (NYSE:RMD) has a better chance of fighting its competition in the U.S. market than elsewhere. However, it has done considerably well so far.

Philips Respironics, a subsidiary of Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), provides innovative solutions for the treatment of sleep and respiratory diseases. It has three groups: sleep and home respiratory, hospital, and international. Sleep and home respiratory includes home respiratory care, SDB, sleep well ventures, and respiratory drug delivery.

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