ResMed (RMD) Flagged As A Storm The Castle Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified ResMed ( RMD) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified ResMed as such a stock due to the following factors:

  • RMD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $54.7 million.
  • RMD has traded 155,172 shares today.
  • RMD is trading at 2.24 times the normal volume for the stock at this time of day.
  • RMD crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on RMD:

ResMed Inc., through its subsidiaries, engages in the development, manufacture, and distribution of medical equipment for treating, diagnosing, and managing sleep-disordered breathing and other respiratory disorders. The stock currently has a dividend yield of 2.3%. RMD has a PE ratio of 19.8. Currently there are 5 analysts that rate ResMed a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for ResMed has been 1.2 million shares per day over the past 30 days. ResMed has a market cap of $6.7 billion and is part of the health care sector and health services industry. The stock has a beta of 0.71 and a short float of 25.7% with 31.52 days to cover. Shares are up 0.8% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ResMed as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • RESMED INC has improved earnings per share by 13.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RESMED INC increased its bottom line by earning $2.10 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.51 versus $2.10).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income increased by 11.2% when compared to the same quarter one year prior, going from $77.94 million to $86.64 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RMD's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.26, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, RESMED INC's return on equity exceeds that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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