RESMED INC (NYSE:RMD) – A Strong Candidate for Quality Investors

RESMED INC (NYSE:RMD) stands out as a compelling pick for quality-focused investors, meeting key criteria for long-term growth, profitability, and financial health. The company, which specializes in digital health and cloud-connected medical devices for respiratory disorders, demonstrates consistent performance across multiple metrics.

Why RMD Fits the Quality Investing Profile

• Strong Revenue and EBIT Growth: Over the past five years, RMD has delivered an annual revenue growth of 8.5% and EBIT growth of 16.8%, indicating both top-line expansion and improving operational efficiency.
• High Return on Invested Capital (ROIC): With an ROIC of 54.1%, the company efficiently generates profits from its capital investments, far exceeding the 15% threshold for quality stocks.
• Low Debt and Strong Cash Flow: RMD’s debt-to-free-cash-flow ratio of 0.43 suggests it could repay all debt in less than six months, reflecting a robust balance sheet.
• Profit Quality: The company converts 91.2% of net income into free cash flow, demonstrating reliable earnings quality.

Fundamental Strengths

RMD’s financial health is further supported by:

• High Profit Margins: Operating margin of 32.1% and net margin of 26.2% place it among the top performers in its industry.
• Positive Growth Outlook: Analysts expect continued revenue growth of 8.5% annually over the next three years.
• Solvency and Liquidity: A current ratio of 3.4 and Altman-Z score of 14.0 indicate low bankruptcy risk.

While the stock trades at a premium (P/E of 28.4), its strong fundamentals and growth prospects justify the valuation for quality investors.

For more stocks that fit the Caviar Cruise strategy, explore the Caviar Cruise screener.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.