The ResMed (ASX: RMD) Share Price Is Going Nuts

The ResMed Inc. (ASX: RMD) share price is up as much as 10.5% to a high of $16.25 after handing down the third quarter results for 31 March 2019, with revenue up 12% year-over-year.

ResMed is best known for manufacturing machines to assist people with sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases.

Key Results

ResMed reported impressive results including:

  • Revenue up 12% to USD$662.2 million
  • Gross margin up 1% to 59.2%
  • Net profit down 4% to USD $105.4 million
  • Diluted earnings per share down 4% to USD$0.73
  • Dividend of USD$0.37
  • Software as a Service (SaaS) revenue up 101%.

Management Commentary

ResMed’s CEO Mick Farrell was pleased with the result, highlighting the importance of software as a service (SaaS) going forward by saying, “we had another strong quarter with top-line revenue growth across all categories of our business, including a solid contribution from recently acquired SaaS companies and growth in international device sales”.

Why I Like ResMed…

Continuous positive airway pressure (CPAP) is considered the gold standard for treating sleep apnea. Companies like Somnomed Ltd (ASX: SOM), which manufactures mouth guards to treat the condition, aren’t a viable threat to ResMed. If ResMed believed Somnomed had a worthwhile product, they would have acquired them by now.

In my opinion, not only does ResMed produce machines which are the gold standard, they are now connecting those machines to the cloud and collecting data, which will be invaluable going forward. This company is much more than a device manufacturer and has a huge competitive advantage which I expect it to maintain for the foreseeable future and continue to grow profits.

Disclosure: at the time of writing, Andrew does not own shares in any of the companies mentioned.

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