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Eyes on the ResMed (ASX:RMD) share price

The ResMed CDI (ASX: RMD) share price is in the spotlight as it released its Q3 update. How will this update affect the ResMed share price?

ResMed develops and manufactures medical devices to help people with sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases.

It also provides out-of-hospital software platforms to support professionals and caregivers who help people stay healthy in a home or care setting of their choice.

Due to the pandemic, ResMed experienced a rapid rise in demand for ventilators.

RMD share price

Source: Rask Media RMD 2-year share price chart

Sales and gross margins remain stagnant

It seems growth has stalled due to the deceleration in demand for ventilators. ResMed posted sales of $768.8 million for Q3 FY21, resulting in a fall of 3% in constant currency terms.

With respect to gross margins, this didn’t change too much as well.

Most notably, revenue in the US, Canada and Latin America grew by 2%, which was mainly driven by strong sales in masks. However, this was partially offset by a fall in demand for ventilators.

As for Europe, Asia and other markets, revenue declined by 13% due to lower device sales, a decline in demand for ventilators and flat sales for masks.

ResMed keeps expenses low

The company managed to reduce its selling, general and administrative expenses by 11% on a constant currency basis.

This was mainly due to savings in travel and cost management measures brought on by the pandemic.

My view on ResMed

ResMed benefited a lot from the pandemic last year but it seems to have slowed down.

The deceleration in demand for ventilators reflects the improving pandemic situation across the world as countries focus on rolling out vaccines.

Even sales for masks in Europe and Asia have fallen.

Whilst the pandemic is far from over, these trends make me question when the COVID-induced growth will peter out.

I would consider stripping away the COVID-induced growth to determine what ResMed’s normalised revenue and earnings look like over the long term.

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