ResMed Inc (NYSE:RMD) Stands Out as a Quality Investment with Strong Financials

Digital health company ResMed Inc (NYSE:RMD) has become a notable option for quality investors using a methodical screening process. The Caviar Cruise investment strategy works to find companies with outstanding business basics, lasting competitive strengths, and steady financial results. This method favors long-term ownership of businesses showing solid revenue increases, improving profitability, high returns on capital put to work, acceptable debt, and good earnings that turn into free cash flow effectively.

Financial Performance Metrics

ResMed shows solid financial traits that match quality investing ideas well. The company's past results display a trend of steady increase and operational effectiveness:

• Five-year revenue compound annual growth rate of 8.2%, clearly above the 5% minimum level
• EBIT increase of 15.8% over the same time, notably higher than revenue increase
• Outstanding return on invested capital excluding cash and goodwill of 56.9%
• Debt-to-free cash flow ratio of 0.4 years, showing very little financial risk
• Five-year average profit quality of 92.4%, indicating good cash conversion

The EBIT increase being much higher than revenue increase implies ResMed has meaningful operating leverage and pricing ability. This situation often points to competitive strengths that let companies grow profit margins even while revenues increase, a sign of good businesses.

Profitability and Efficiency

ResMed's outstanding return metrics highlight the effectiveness with which management uses capital. The 56.9% ROICexgc is much better than the 15% minimum level for quality investments and shows the company produces significant returns from each dollar put into the business. This measurement is especially important for quality investors because it shows the company's ability to put earnings back into the business at high return rates, building a positive cycle of growing value over time.

The company's profit quality score of 92.4% shows that almost all accounting profits become real cash flow. This trait gives financial options for strategic moves, like possible purchases, research and development, or giving capital back to shareholders via dividends and buybacks. The small debt load, needing under half a year of free cash flow to pay off completely, adds to the company's financial strength.

Fundamental Analysis Overview

According to Chartmill's full evaluation, ResMed gets an overall fundamental rating of 8 out of 10, placing it well within the Health Care Equipment & Supplies industry. The study points out several key traits:

• Outstanding profitability scores with top-level industry margins and returns
• Good financial condition with very little bankruptcy risk
• Reliable dividend increase history going over ten years
• Stable past growth rates in both revenue and earnings

While valuation measurements seem fair compared to industry peers, they are close to market averages, implying investors are paying a standard price for the company's quality features instead of finding a very cheap opportunity. This fits with the quality investing idea that stresses business excellence over looking for bargains.

Investment Considerations

For quality investors using a buy-and-hold approach, ResMed offers several positive features beyond the measurable data. The company works in the increasing digital health field, gaining from long-term population trends like older populations and more attention on sleep disorders. Its worldwide presence gives geographic variety, while the type of its medical devices and cloud software builds repeating revenue and high costs to change providers.

The company's management has shown skill in handling regulatory settings and adding purchases effectively. ResMed's products treat long-term conditions that need continuous care, creating stable need less affected by economic changes. These non-number factors support the good number measurements found by the Caviar Cruise screening process.

View more quality investment options found through the Caviar Cruise screening method.

This article gives factual study based on public data and screening methods. It is not investment advice, a suggestion to buy or sell any security, or guidance on investment timing. Investors should do their own research and talk to financial advisors before making investment choices. Past results do not ensure future outcomes.