ResMed (RMD:NYS) Fundamental Valuation Report

Fundamental Valuation Report

ResMed(RMD:NYS)

Healthcare:Medical Instruments & Supplies

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$174.68 (USD) 09/09/2020

Weighted Valuation
$171.61 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 1.8%

Valuation Models Discounted Cash Flow: $157.59 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $207.25 this stock is Undervalued

Company Overview (RMD:NYS USD)

Price 174.68
Range 173.04 – 176.86
52 week 114.34 – 205.63
Open 173.92
Vol / Avg. 445766/568145
Mkt cap 25.31B
P/E 40.91
Div/yield 1.56/0.01
EPS 4.27
Shares 144.9M
Beta 0.35

Company Description

ResMed Inc is one of the largest global respiratory medical devices companies, primarily developing and supplying flow generators, masks and accessories for the treatment of sleep apnea. Increasing diagnosis of sleep apnea combined with ageing populations and increasing prevalence of obesity is resulting in a structurally growing market. The company earns 65% of revenue in the Americas and the balance across other regions dominated by Europe, Japan and Australia. Recent developments and acquisitions have focused on digital health as ResMed is aiming to differentiate itself through the provision of clinical data for use by the patient, medical care advisor and payor in the out-of-hospital setting.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for RMD:NYS

Using a discounted cash flow model we generated an intrinsic value of $157.59 (USD) for RMD:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

RMD:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $157.59 1% 5% 1% 5%
WACC (or Ke) 4.05 $213.00 $124.15
Terminal Growth Rate 0.00 $126.57 $208.97
Tax Rate 0.15 $168.07 $147.11
Cash Flow 1,308,100,000 $148.29 $166.89
Capital Expenditures -69,474,800 $157.13 $158.05
Long Term Debt 1,173,136,000 $158.00 $157.19

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $308.58 (USD) for RMD:NYS. We also generated a valuation of $146.61 (USD) using other metrics and comparables.
The comparable companies were Hologic (HOLX:NAS), Masimo (MASI:NAS), Dentsply Sirona (XRAY:NAS), Repligen (RGEN:NAS) and iRhythm Technologies (IRTC:NAS).

Company RMD:NYS End Date Value
Earnings/Share $4.27 (USD)
Book Value/Share $17.23 (USD)
Sales/Share $20.30 (USD)
Cash Flow/Share $5.51 (USD)
EBITDA/Share $6.56 (USD)
Price Based on Comps Adjustment Factor (%)
$493.67 (USD) -45.6
$266.77 (USD) 35.7
$284.74 (USD) 37.4
$280.78 (USD) -20.1
$333.93 (USD) -10.9
RMD:NYS Ratios Used Average Values HOLX:NAS MASI:NAS XRAY:NAS RGEN:NAS IRTC:NAS
40.91 PE Ratio 115.61 31.51 57.21 0.00 258.12 0.00
10.14 PB Ratio 15.48 6.80 9.05 2.08 7.02 52.45
8.60 PS Ratio 14.03 4.78 12.18 2.85 25.28 25.04
31.71 PCF Ratio 52.60 22.44 56.19 15.74 116.01 0.00
27.38 EV to EBITDA 50.94 22.86 41.75 31.73 107.41 0.00

Multiples

Using a multiples approach we generated a valuation of  $138.82 (USD) for RMD:NYS

Company RMD:NYS End Date Value
Earnings/Share $4.27 (USD)
Book Value/Share $17.23 (USD)
Sales/Share $20.30 (USD)
Cash Flow/Share $5.51 (USD)
EBITDA/Share $6.56 (USD)
Price Based on Comps Adjustment Factor
$158.82 (USD) 0
$113.52 (USD) 0
$120.22 (USD) 0
$161.24 (USD) 0
$140.32 (USD) 0
Ratios Ratio Average
PE Ratio 37.19
PB Ratio 6.59
PS Ratio 5.92
PCF Ratio 29.27
EV to EBITDA 21.40

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  RMD:NYS for the last 10 years was  6.18

We ran the Adjusted Book Value for  RMD:NYS and generated a book value of  $17.23 (USD)
By multiplying these we get an adjusted valuation of  $106.46 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for RMD:NYS. The 2 analysts have a concensus valuation for RMD:NYS for 2021 of $207.25 (USD).

RMD:NYS ResMed

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 1 2 2.4000 Underperform 2020-9-8

Current Price: 174.68 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 4.50 5.05 6.10
# EPS Analysts 5 5 2
Mean Revenue 3,095.30 3,349.30 3,687.30
# Revenue Analysts 5 5 2
Mean Target Price 207.25
Mean Cash Flow 4.87 5.95 6.93
Mean EBITDA 975.50 1,088.50 1,308.10
Mean Net Income 656.70 742.00 895.60
Mean Debt Outstanding 251.60 -399.20 -1,157.00
Mean Tax Rate 18.00 20.00
Mean Growth Rate 7.44
Mean Capital Expenditure 86.20 92.90 84.70

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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