Bottom Line Inc

March 29, 2017 | ResMed Inc. | RMD


Today’s Stock of the Week makes devices for people with chronic breathing problems. It’s an underserved market with plenty of room to grow…

Breathe Easy

ResMed Inc. (RMD), a global leader in designing and manufacturing devices to manage respiratory diseases, is adding a new product line that is likely to enhance profits.

Its main product now is continuous positive airway pressure (CPAP) units to treat sleep apnea. There are at least 22 million people with sleep apnea in the US alone, and it is estimated that only 10% to 15% of those people use CPAP machines. These machines work well and are cost-effective, so market penetration is likely to grow strongly. Units cost customers a few hundred to about a thousand dollars each and usually are covered by insurance.

ResMed is now moving into an allied field—oxygen concentration and delivery systems for people with chronic obstructive pulmonary disease (COPD), a leading cause of death worldwide. ResMed’s two-to-three-pound device takes the place of a wheeled oxygen tank that COPD sufferers must otherwise use.

Revenue of $1.8 billion in fiscal 2016 should grow to $2.1 billion this fiscal year and $2.2 billion in fiscal 2018. The dividend of $1.32/share/yr. recently yielded 1.84% and appears secure.

Fiscal year.: June. Earnings per share: 2018 est./$2.96…2017 est./$2.61…2016/$2.49.

This Week’s Expert

Charles L. Travers is co-portfolio manager of the $230 million Motley Fool Great America Fund (TMFGX), Alexandria, Virginia.

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