We wrote about ResMed a few weeks ago for clients (25th March 2014) and the stock fundamentally looked appealing because of the following characteristics:
1. Leveraged to sleeping disorder volumes due to higher obesity rates in developed nations
2. High product gross margins (> 60%)
3. Returns above the cost of capital (ROA > 15%)
We’ve looked at RMD a couple of times in the last 6 months. On 6th of November here on the Finance News Network we warned of a drop in the share price to under $4.80. We have finally seen RMD break the downtrend. We have circled this break on the chart. Now that the shorter term downtrend is broken, it should resume the longer term uptrend, which implies levels up towards $6. Before then, we expect some strong resistance between $5.60 - $5.80.
