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WOW and Resmed CDI: 2 ASX shares for your watchlist

The Woolworths Group Ltd (ASX:WOW) share price is up 3.9% since the start of the 2023. The Resmed CDI (ASX:RMD) share price is tracking 36% off its 52-week lows.

WOW share price

Founded in 1924, Woolworths is a retail operator in Australia and New Zealand with over 3,000 stores and over 100,000 employees. It is currently the Australia’s largest company in terms of revenue and market share.

Woolworths’ main operations include supermarkets (under the Woolworths brand in Australia and Countdown in New Zealand), retailing through its discount department stores under the Big W brand, and business-to-business (B2B) brands like PFD. Overwhelmingly, it’s 35%+ share of Australian supermarkets is its crown jewel.

Woolworths is a very popular choice for many ASX investors seeking dividend income. It consistently pays a fully franked dividend, usually at a yield of over 3%, and offers a very defensive earnings stream. It’s competitive advantage is probably best summarised as scale (distribution, low costs, etc.) and proximity (most shoppers still shop based on distance to the supermarket).

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.

Share price valuation

One way to have a ‘quick read’ of where the WOW 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, Woolworths Group Ltd shares have a dividend yield of around 3.02%, which compares to its 5-year average of 2.66%. Put simply, WOW shares are trading below their historical average dividend yield.

The RMD share price trades at a price-sales ratio of 3.54x, which compares to its 5-year long-term average of 7.81x. So, RMD shares are trading below their historical average. However, please do more investigating than a simple multiple like this. Our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like Resmed CDI.

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