Are ResMed CDI (ASX:RMD) shares a good investment in 2026? It's a question that many investors are asking, especially given the recent decline in the share price. In this article, I'll take a deep dive into the company, its business model, and its financial health to help you make an informed decision. But before we get started, let me share my initial thoughts. Personally, I think that ResMed CDI shares are undervalued, and I believe that the company has a strong future ahead of it. However, I'm not going to sugarcoat it - there are some risks and challenges that investors should be aware of. So, let's dive in and explore the key factors that could impact the RMD share price in the coming years.
A Global Leader in Medical Equipment
ResMed is a global leader in the medical equipment industry, with a focus on sleep apnea and respiratory care. The company was founded in Australia by Peter Farrell, and it has since grown to become a major player in the US and around the world. With over 10,000 employees and a presence in over 140 countries, ResMed is a true global brand. The company's two primary business units are Sleep and Respiratory Care, and Software as a Service (SaaS). The Sleep and Respiratory Care unit is where the magic happens, providing industry-leading CPAP machines for the treatment of obstructive sleep apnea (OSA). These machines are used by patients ranging from those who only require therapy at night to those who are dependent on non-invasive or invasive ventilation for life-support.
Financial Health and Key Metrics
Now, let's take a closer look at the financial health of ResMed CDI. The company's revenue has been growing steadily over the past few years, with a compound annual growth rate (CAGR) of 13.6% over the last three years. This is a strong indicator of the company's ability to generate sales and revenue, and it's a positive sign for investors. The gross margin is also impressive, at 57.4%, which means that the company is making a healthy profit on its core products and services. And the profit numbers are even more impressive, with a CAGR of 29.1% over the past three years.
However, it's not just about the numbers. We also need to consider the company's capital health. One important metric to look at is net debt, which is simply the total debt minus the company's cash holdings. In the case of ResMed CDI, the current net debt is -$624m, which is a positive sign. A high number here would indicate a lot of debt, which could lead to higher interest payments and greater instability. But a negative value, like ResMed's, indicates that the company has more cash than debt, which can be seen as a good thing.
Another metric to consider is the debt/equity ratio, which tells us how much debt the company has relative to shareholder ownership. ResMed CDI has a debt/equity ratio of 18.0%, which means that the company has more equity than debt. This is a positive sign, as it indicates that the company is not overly leveraged.
Finally, we can look at the return on equity (ROE), which tells us how much profit a company is generating as a percentage of its total equity. ResMed CDI generated an ROE of 22.7% in FY24, which is a strong indicator of the company's ability to allocate capital efficiently and generate value.
What to Make of RMD Shares?
Now that we've explored the financial health of ResMed CDI, let's take a look at what to make of the RMD shares. As a growth company, one way to put a general prediction on the RMD share price is to compare its price-to-sales multiple over time. Currently, ResMed CDI shares have a price-sales ratio of 4.38x, compared to its 5-year average of 8.70x. This means that the shares are trading below their historical average, which could be a sign that the share price has fallen, or sales have increased, or both.
In the case of ResMed CDI, revenue has been growing over the last three years, which is a positive sign. However, it's important to keep in mind that context is important, and this is just one valuation technique. Investment decisions can't just be based on one metric. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). Both of these models would be a better way to value the RMD share price.
Conclusion: A Strong Buy for Long-Term Investors
In conclusion, ResMed CDI shares are a strong buy for long-term investors. The company has a strong financial position, with steady revenue growth, impressive gross margins, and a healthy profit margin. The capital health is also strong, with a negative net debt and a low debt/equity ratio. And while the price-sales ratio is currently below its historical average, it's important to remember that this is just one valuation technique. Overall, I believe that ResMed CDI is a company with a bright future ahead of it, and I'm confident that the shares will continue to perform well in the coming years.
