Financial Survey: ResMed (RMD) versus Waters (WAT)

ResMed (NYSE: RMD) and Waters (NYSE:WAT) are both large-cap healthcare companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, risk, profitability, earnings, dividends, analyst recommendations and valuation.

Profitability

This table compares ResMed and Waters’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ResMed 16.58% 21.53% 11.90%
Waters 24.34% 23.61% 11.84%

Dividends

ResMed pays an annual dividend of $1.40 per share and has a dividend yield of 1.6%. Waters does not pay a dividend. ResMed pays out 56.7% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares ResMed and Waters’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ResMed $2.07 billion 5.94 $342.28 million $2.47 35.04
Waters $2.17 billion 7.33 $521.50 million $6.78 29.45

Waters has higher revenue and earnings than ResMed. Waters is trading at a lower price-to-earnings ratio than ResMed, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

ResMed has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500. Comparatively, Waters has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500.

Insider & Institutional Ownership

61.9% of ResMed shares are owned by institutional investors. Comparatively, 92.1% of Waters shares are owned by institutional investors. 1.8% of ResMed shares are owned by company insiders. Comparatively, 5.1% of Waters shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings for ResMed and Waters, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ResMed 4 4 3 0 1.91
Waters 0 10 5 0 2.33

ResMed currently has a consensus price target of $65.83, suggesting a potential downside of 23.93%. Waters has a consensus price target of $192.62, suggesting a potential downside of 3.53%. Given Waters’ stronger consensus rating and higher possible upside, analysts clearly believe Waters is more favorable than ResMed.

Summary

Waters beats ResMed on 13 of the 16 factors compared between the two stocks.

ResMed Company Profile

ResMed Inc. is a holding company. The Company is engaged in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (SDB), chronic obstructive pulmonary disease (COPD), neuromuscular disease and other diseases. SDB includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. Its cloud-based software digital health applications, along with its devices, are designed to provide connected care to improve patient outcomes. The Company’s portfolio of products includes devices, diagnostic products, mask systems, headgear and other accessories, dental devices, portable oxygen concentrators (POCs) and cloud-based software informatics solutions. The Company produces Continuous Positive Airway Pressure (CPAP), Variable Positive Airway Pressure (VPAP) and AutoSet systems for the titration and treatment of SDB.

Waters Company Profile

Waters Corporation is an analytical instrument manufacturer. The Company operates through two segments: Waters and TA. It designs, manufactures, sells and services high performance liquid chromatography (HPLC), ultra performance liquid chromatography (UPLC and together with HPLC, referred to as LC) and mass spectrometry (MS) technology systems and support products, including chromatography columns, other consumable products and post-warranty service plans. It also designs, manufactures, sells and services thermal analysis, rheometry and calorimetry instruments through its TA product line. It is also a developer and supplier of software-based products that interface with the Company’s instruments, as well as other suppliers’ instruments. Its LC and LC-MS instruments are utilized in a range of industries to detect, identify, monitor and measure the chemical, physical and biological composition of materials, and to purify a range of compounds.

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