posted: Sunday 2.20 p.m. Sydney time June 2, 2002 last price:...

posted: Sunday 2.20 p.m. Sydney time June 2, 2002
last price: $4.80 code: RMD
Institutional analysts, in terms of a consensus estimate, value Resmed somewhere near $7.50.
If that is true, why is the share price here? The answer is momentum.
Price movement is a function of momentum, not value. This is why markets nearly always overshoot the runway, both at the top, and at the bottom.
In terms of Resmed, the evidence suggests that the runway is now overshot. On 2002 earnings estimates, the price earnings multiple is now in the 20's. That is modest.
Even more importantly, there is very good reason to believe that the bearish momentum is now exhausted. If the price action on Friday is the guide, Resmed has made a bottom. It is not just the very bullish nature of the candle posted on the day, it is the fact that the key bullish element, the lower shadow, extends below the key support line, at 4.72. No matter how the sandwich is cut, it is a bullish picture.
Strictly speaking, confirmation of the bullish signal is required, but a long white body today will suffice. Perhaps the price will wander sideways briefly, but that aside, the signals do suggest that the next major price move will be to the topside.
It has been a long wait for those who have held back waiting to see value in the Resmed price, but with that value now on the table, and with the technical signals positive, Resmed rates as a buy.
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If you do have a longer term outlook, then Resmed at 4.80 is probably very good value.
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