Here’s Why We Think ResMed Stock Is Undervalued After An 18% Fall In A Month

ResMed (NYSE: RMD), a medical equipment company, has seen an 18% fall in a month, underperforming the broader S&P500 index, up 1%. The recent fall can be attributed to its downbeat Q4 fiscal 2023 results (fiscal ends in June). The company reported revenues of $1.1 billion, up 23% y-o-y, aligning with the consensus estimate. However, its bottom line of $1.60 on a per share and adjusted basis fell short of the $1.67 consensus estimate. Gross margin contracted 200 bps during the quarter due to higher component and manufacturing costs.

Even if we look at the longer term, RTX stock is down 30% from levels seen in late 2021, faring worse than the S&P 500 index, down around 6%. This 30% fall for RMD stock since late 2021 can be attributed to 1. the company’s P/S ratio contracting 45% to 6.2x revenues vs. 11.9x in 2021, 2. a 1% rise in its total shares outstanding to 148 million, partly offset by 3. ResMed’s revenue growth of 31% to $4.2 billion over the last twelve months, compared to $3.2 billion in 2021. This has meant that the company’s revenue per share metric has risen 30% to $28.62 now, compared to $21.97 in 2021—our dashboard on Why ResMed Stock Moved has more details.