ResMed (NYSE: RMD) and EnteroMedics (NASDAQ:ETRM) are both medical companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Profitability

This table compares ResMed and EnteroMedics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ResMed 16.56% 21.99% 11.86%
EnteroMedics -4,399.48% -167.73% -123.00%

Risk & Volatility

ResMed has a beta of 0.79, meaning that its stock price is 21% less volatile than the S&P 500. Comparatively, EnteroMedics has a beta of 3.08, meaning that its stock price is 208% more volatile than the S&P 500.

Valuation & Earnings

This table compares ResMed and EnteroMedics’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
ResMed $2.07 billion 5.32 $568.89 million $2.41 32.11
EnteroMedics $571,759.00 29.45 -$22.15 million ($16.72) -0.12

ResMed has higher revenue and earnings than EnteroMedics. EnteroMedics is trading at a lower price-to-earnings ratio than ResMed, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for ResMed and EnteroMedics, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ResMed 3 5 2 0 1.90
EnteroMedics 0 0 1 0 3.00

ResMed presently has a consensus target price of $64.67, suggesting a potential downside of 16.43%. EnteroMedics has a consensus target price of $11.03, suggesting a potential upside of 443.35%. Given EnteroMedics’ stronger consensus rating and higher probable upside, analysts clearly believe EnteroMedics is more favorable than ResMed.

Insider & Institutional Ownership

60.1% of ResMed shares are owned by institutional investors. Comparatively, 1.3% of EnteroMedics shares are owned by institutional investors. 2.0% of ResMed shares are owned by insiders. Comparatively, 5.5% of EnteroMedics shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

ResMed pays an annual dividend of $1.40 per share and has a dividend yield of 1.8%. EnteroMedics does not pay a dividend. ResMed pays out 58.1% of its earnings in the form of a dividend.

Summary

ResMed beats EnteroMedics on 9 of the 15 factors compared between the two stocks.

ResMed Company Profile

ResMed Inc. is a holding company. The Company is engaged in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (SDB), chronic obstructive pulmonary disease (COPD), neuromuscular disease and other diseases. SDB includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. Its cloud-based software digital health applications, along with its devices, are designed to provide connected care to improve patient outcomes. The Company’s portfolio of products includes devices, diagnostic products, mask systems, headgear and other accessories, dental devices, portable oxygen concentrators (POCs) and cloud-based software informatics solutions. The Company produces Continuous Positive Airway Pressure (CPAP), Variable Positive Airway Pressure (VPAP) and AutoSet systems for the titration and treatment of SDB.

EnteroMedics Company Profile

EnteroMedics Inc. (EnteroMedics) is a medical device company. The Company is focused on the design and development of devices that use neuroblocking technology to treat obesity, metabolic diseases and other gastrointestinal disorders. The Company’s neuroblocking technology, which is referred to as VBLOC therapy, is designed to intermittently block the vagus nerve. The Company’s initial product is the Maestro Rechargeable System, which uses VBLOC therapy to limit the expansion of the stomach, help control hunger sensations between meals, reduce the frequency and intensity of stomach contractions and produce a feeling of early and prolonged fullness. The Company’s VBLOC therapy is designed to block the gastrointestinal effects of the vagus nerve by replicating a vagotomy using high-frequency, low-energy electrical impulses to intermittently interrupt naturally occurring neural impulses on the vagus nerve between the brain and the digestive system.

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