NEW YORK (TheStreet) -- When I was a boy I remember my grandfather spending a couple of weeks at our family home. Before going to bed he would always fill a little shot glass with some gold-colored liquid from a bottle with a man's name (Jack Daniels) on it.
When I asked him why he'd say, "It helps me fall asleep." When I became a teenager I learned what that gold-colored liquid was that Grandpa used it for his nightly insomnia. My personal struggles with sleep are different than Grandpa's. I can fall asleep without much assistance, but I have trouble staying asleep.
My doctor diagnosed me with a "sleep-disordered breathing" condition and suggested that I try a bi-level, continuous positive airway pressure (CPAP) machine. Now I can't sleep without it.
One of the machines I've used and benefited from is made by
, and I've since learned it's an industry-leading company with lots of positive momentum.
RMD is a profitable developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing (SDB) and other respiratory disorders. The company's Web site declares the company is "...dedicated to developing innovative products to improve the lives of those who suffer from these conditions and to increasing awareness among patients and healthcare professionals of the potentially serious health consequences of untreated sleep-disordered breathing."
Millions suffer from SBD and, as ResMed's Web site
, "SDB affects around 20% of the adult population, making it as widespread as diabetes or asthma. However, awareness is low and we believe that about 90% of people who have OSA remain undiagnosed and untreated."
This is a very serious, life-threatening challenge, and SBD is most commonly related with a condition called "sleep apnea." RMD's Web site explains the opportunities: "Along with an increasing understanding of the morbidity and mortality caused by SDB, this discrepancy has created one of the fastest growing segments of the respiratory industry. ResMed is positioned to meet the growing challenges of this under-penetrated market."
This may help explain why RMD's year-over-year quarterly earnings growth was a remarkable 41%. The stock, which closed on Tuesday, at $40.86, is selling for less than 18 times forward (one-year earnings). Yet, its price-to-earnings-to-growth (PEG) ratio (five-year expected) is only 1.06. This indicates shares are still undervalued.
Take a look at the one-year price chart with its skyrocketing diluted EPS growth rate.
Analysts' consensus one-year target price for RMD is currently just above the 52-week high of $42.30. There's room for, and the possibility of, upward earnings guidance and thus a higher price target. Shares dipped to $38.08 on Nov. 16 after it paid its quarterly dividend of 17 cents.
The current annual dividend provides a yield-to-price of 1.7%. If you're fortunate enough to pick up some shares on a price correction to $38.50, that yield-to-price rises to nearly 1.8%. You might want to watch the stock's movement for the next few days while doing your own due diligence about RMD.
If you can't wait to own some shares I'd recommend you consider a trailing stop loss
such as the one referred to in the link above. This will limit your downside risk while opening the door to letting the share price move higher.
The Jack Daniels that Grandpa used is now one of a huge lineup of brand name alcoholic libations made by
For more than 140 years, Brown-Forman has been building fine-quality beverage alcohol brands, including Jack Daniel's Tennessee Whiskey, Southern Comfort, Finlandia, Jack Daniel's & Cola, Canadian Mist, Korbel, Gentleman Jack, el Jimador, Herradura, Sonoma-Cutrer, Chambord, New Mix, Tuaca, and Woodford Reserve.
Brown-Forman's brands are supported by nearly 4,000 employees and sold in approximately 160 countries worldwide. For more information about the company, please visit
Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.
On Nov. 27 the company's Board of Directors declared a special cash dividend of $4 per share on its Class A and Class B Common Stock that will be paid on Dec. 27 to stockholders of record on Dec. 12. This special cash dividend is in addition to the 9.3% increase in the company's regular cash dividend announced by the company on Nov. 15.
Brown-Forman Chief Executive Officer Paul Varga said, "We believe this special dividend is the best utilization of the company's strong balance sheet at this time. Along with our recently announced increase in the regular dividend, this return of cash to shareholders reinforces our belief in the health of our business and our commitment to deploy its strong cash generation in the most effective and efficient manner."
Varga added, "The company chose to make this payment in calendar 2012 because of the uncertainty surrounding future dividend tax rates. Even after this special dividend, we retain ample capital capacity to make long-term investments in our business, such as the current expansion of the Jack Daniel Distillery and strategic acquisitions."
BFB reported its latest quarterly earnings after the market opened. Analysts had been looking for an estimated 78 cents per share for the quarter that ended Oct. 31 -- the company reported 80 cents. Out of 12 analysts that rate BFB, one gives it a "strong buy," one a "buy", and seven a "hold."
Looking at the one-year price chart below including its diluted EPS growth rate, one can see why the share price has done so well since May.
Its 2.29 PEG ratio (five-year expected) looks high to me even though its supported by an operating margin (trailing 12-month) of 30% and a profit margin of 20%. Optimists might suggest the current fiscal dramas and economic conditions may drive more people to drink, but it would take some tremendous earnings growth going forward to support a PE ratio of over 23.
BFB's timely and generous dividend-paying decisions have undoubtedly been one of the big attractions to this stock.
By the way, if you have insomnia or SDB, a shot of Jack Daniel's before bedtime is probably the opposite of what you should be doing. In 1959 it may have been my grandpa's only option. Today, thanks to the advances in sleep medicine, there are safer, more effective treatment methods available.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.