Another excellent result from RMD. We won’t rehash the result here, rather, we’d point out the price of lofty expectations.
The numbers look great, on all metrics, and the underlying story of a competitors woes add to the pre-existing Quality company thematic.
But note what’s in the price, and just how long RMD have to keep up double digit EPS growth.
On our numbers, RMD will need to generate between 11% EPS growth, at the low end, and 20% at the high end, in order to achieve a market like compound annual growth rate of 7% over the next decade.
The median historical CAGR has been above this lower estimate range, but not enormously so. The competitors product recall is unlikely to make up the remainder, but this is exactly the trade the market is proposing.
We have been fans of RMD for a long time, and will remain so, but we think more compelling (and frankly easier) opportunities lie elsewhere.
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