UTSanDiego.com

Wake Up to These 2 Opportunities

Tickers in this article: RMD
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 ResMed (RMD) , 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 states emphatically , "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. RMD ChartRMD data by YCharts

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.