The BHP Group Ltd (ASX:BHP) share price has decreased 0.1% since the start of the 2023. The Resmed CDI (ASX:RMD) share price is tracking 38% off its 52-week lows.
BHP share price
BHP Group (formerly BHP Billiton) is a diversified natural resources company producing commodities that was founded in 1885.
BHP’s principal business lines are mineral exploration and production. BHP’s assets, operations and interests are separated into three focus areas: Copper and related minerals (e.g. gold, uranium, silver, zinc, etc.), Iron Ore, and Coal (i.e. metallurgical and energy).
BHP shares are often seen as a reliable dividend paying investment and is a common constituent of an ASX share portfolio. If you own an popular ETF or LIC, or invest with Industry Super, chances are you have exposure.
RMD share price
Resmed was founded in 1989 by Peter Farrell in Australia but is now based in San Diego, California. It is a medical equipment company that provides cloud-connectable continuous positive airway pressure, or CPAP, machines for the treatment of obstructive sleep apnea (OSA). If Resmed’s name or financial reports look different it’s because Resmed’s ASX shares are CDIs and its primary listing is the NYSE.
Resmed operates on a global scale, with 10,000+ employees and a presence in over 140 countries. It has two primary business units: Sleep and Respiratory Care, and Software as a Service (SaaS). Within Sleep and Respiratory Care, ResMed provides industry-leading CPAP machines for sleep apnea. Other devices are often marketed in this space but CPAP is the most effective therapy for all severities of OSA. The Respiratory Care unit covers patients ranging from those who only require therapy from CPAP systems at night to those who are dependent on non-invasive or invasive ventilation for life-support. Within the SaaS unit Resmed providers that assists durable or home medical equipment (DME/HME). Basically, it assists in out-of-hospital care.
Due to Resmed’s large digital health network powered by its cloud-connected devices, Resmed can leverage its industry-leading hardware (e.g. masks and humidifiers) and its SaaS data to drive insights, improve outcomes and reduce overall healthcare costs.
Share price valuation
As a blue chip, one way to have a ‘quick read’ of where the BHP share price is, is to study something like dividend yield thru time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can be influenced by yearly or bi-yearly fluctuations. Currently, BHP Group Ltd shares have a dividend yield of around 5.77%, which compares to its 5-year average of 9.38%.
Put simply, BHP shares are trading below their historical average dividend yield. However, keep in mind that BHP’s valuation metrics (like P/E, EV/EBITDA and dividend yield) are at the mercy of commodity cycles. And, more recently, the company has been involved in a number of corporate actions (like divesting oil and gas to Woodside, and buying Mineral Resources). These distort the valuation metrics even further.
The RMD share price trades at a price-sales ratio of 3.33x, which compares to its 5-year long-term average of 7.81x. So, RMD shares are trading below their historical average. The catalyst behind the recent sell-off is clearly the popularity of Ozempic, a weight loss ‘wonder’ drug that is taking the world by storm (particularly young women). This is making some analysts doubt whether or not as many people will suffer from sleep apnea – or, even crazier than that – some analysts are even putting sell orders on fast food companies!
If you ask us, the fear about Ozempic is incredibly overdone. CPAP machines remain the world leading tool for dealing with many respiratory issues.
If you wan to learn more about proper valuation techniques, our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like Resmed CDI.
