AUS
NZ
UK
CA
USA
IND
Highlights
- ResMed share price has climbed significantly since the start of 2024.
- Healthcare stocks, like ResMed, tend to offer consistent revenue due to essential spending.
- The healthcare sector shows strong growth potential, particularly in the SaaS sub-sector.
The ResMed CDI (ASX:RMD) share price has risen 40.8% since early 2024, capturing attention in the healthcare space. ResMed, originally founded in Australia in 1989, now operates globally with its headquarters in San Diego, California. The company specializes in providing cloud-connectable CPAP machines, designed to treat obstructive sleep apnea (OSA), and has a strong presence in more than 140 countries.
ResMed’s primary business revolves around two key segments: Sleep and Respiratory Care, and Software as a Service (SaaS). Through its Sleep and Respiratory Care unit, the company offers top-tier CPAP machines and other respiratory support devices that cater to a broad range of patients, from those needing nighttime therapy to those reliant on life-support ventilation systems. The SaaS unit supports durable or home medical equipment providers, helping improve out-of-hospital care through software solutions.
What stands out for ResMed is its extensive digital health network, powered by cloud-connected devices, which allows the company to gather data, improve patient outcomes, and reduce overall healthcare costs.
Looking at the broader healthcare sector, it offers several advantages. The S&P/ASX200 Healthcare Index (ASX:XHJ) has shown steady growth, returning 3.12% annually over the past five years. Healthcare stocks, like ResMed, often benefit from "sticky" revenue due to the essential nature of healthcare spending, which remains stable even in challenging economic times.
Globally, healthcare profits are expected to rise, with the U.S. healthcare sector alone projected to see a 7% annual increase in profits from 2022 to 2027. The SaaS sub-sector, in particular, is poised for rapid growth, with an estimated annual growth rate of 15% between 2024 and 2030.
Additionally, the growing interest in ethical and sustainable investments could further benefit healthcare companies. As essential service providers, these companies align well with sustainable investment strategies, which are gaining popularity among investors.
Finally, ResMed’s price-to-sales ratio currently stands at 4.96x, below its 5-year average of 8.70x. This suggests the shares are trading at a lower multiple than in the past, even though the company’s revenue has been on the rise over the last few years.
