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ResMed (NYSE:RMD) WACC %

:10.12% (As of Today)
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As of today (2024-02-25), ResMed's weighted average cost of capital is 10.12%%. ResMed's ROIC % is 16.56% (calculated using TTM income statement data). ResMed generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.

For a comprehensive WACC calculation, please access the WACC Calculator.


ResMed WACC % Historical Data

The historical data trend for ResMed's WACC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

ResMed Annual Data
Trend Jun14 Jun15 Jun16 Jun17 Jun18 Jun19 Jun20 Jun21 Jun22 Jun23
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 3.99 2.58 2.20 5.93 7.96

ResMed Quarterly Data
Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 7.35 7.42 7.96 9.58 9.69

Competitive Comparison

For the Medical Instruments & Supplies subindustry, ResMed's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


ResMed WACC % Distribution

For the Medical Devices & Instruments industry and Healthcare sector, ResMed's WACC % distribution charts can be found below:

* The bar in red indicates where ResMed's WACC % falls into.



ResMed WACC % Calculation

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

WACC=E/(E + D)*Cost of Equity+D/(E + D)*Cost of Debt*(1 - Tax Rate)

1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, ResMed's market capitalization (E) is $27070.239 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Dec. 2023, ResMed's latest one-year quarterly average Book Value of Debt (D) is $1626.0972 Mil.
a) weight of equity = E / (E + D) = 27070.239 / (27070.239 + 1626.0972) = 0.9433
b) weight of debt = D / (E + D) = 1626.0972 / (27070.239 + 1626.0972) = 0.0567

2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 4.248%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. ResMed's beta is 1.05.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 4.248% + 1.05 * 6% = 10.548%

3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Dec. 2023, ResMed's interest expense (positive number) was $58.669 Mil. Its total Book Value of Debt (D) is $1626.0972 Mil.
Cost of Debt = 58.669 / 1626.0972 = 3.608%.

4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 207.439 / 1097.825 = 18.9%.

ResMed's Weighted Average Cost Of Capital (WACC) for Today is calculated as:

WACC=E / (E + D)*Cost of Equity+D / (E + D)*Cost of Debt*(1 - Tax Rate)
=0.9433*10.548%+0.0567*3.608%*(1 - 18.9%)
=10.12%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


ResMed  (NYSE:RMD) WACC % Explanation

Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, ResMed's weighted average cost of capital is 10.12%%. ResMed's ROIC % is 16.56% (calculated using TTM income statement data). ResMed generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.


Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.

2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.

3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.

4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.


Related Terms

ResMed (NYSE:RMD) Business Description

Address
9001 Spectrum Center Boulevard, San Diego, CA, USA, 92123
ResMed is one of the largest respiratory care device companies globally, primarily developing and supplying flow generators, masks and accessories for the treatment of sleep apnea. Increasing diagnosis of sleep apnea combined with ageing populations and increasing prevalence of obesity is resulting in a structurally growing market. The company earns roughly two thirds of its revenue in the Americas and the balance across other regions dominated by Europe, Japan and Australia. Recent developments and acquisitions have focused on digital health as ResMed is aiming to differentiate itself through the provision of clinical data for use by the patient, medical care advisor and payer in the out-of-hospital setting.
Executives
Brett Sandercock officer: Chief Financial Officer 17 GUINEVIERE COURT, CASTLE HILL, NEW SOUTH WALES C3 2154
Michael J. Farrell officer: Chief Executive Officer C/O REMED INC, 9001 SPECTRUM CTR. BLVD., SAN DIEGO, CA 92123
Michael J Rider officer: Global General Counsel 9001 SPECTRUM CENTER BLVD, SAN DIEGO CA 92123
Robert Andrew Douglas officer: President and COO 21 ATTUNGA ROAD, NEWPORT, NEW SOUTH WALES C3 2106
Kaushik Ghoshal officer: President, SaaS Business 9001 SPECTRUM CENTER BLVD, SAN DIEGO CA 92123
David Pendarvis officer: Chief Administration Officer REDMED INC, 14040 DANLELSON ST, POWAY CA 92064
Karen Drexler director C/O DIADEXUS, INC., 343 OYSTER POINT BOULEVARD, SOUTH SAN FRANCISCO CA 94080
Justin Leong officer: President, Asia and LATAM C/O RESMED INC, 9001 SPECTRUM CENTER BLVD, SAN DIEGO CA 92123
Desney Tan director 9001 SPECTRUM CENTER BLVD, SAN DIEGO CA 92123
John Hernandez director 9001 SPECTRUM CENTER BLVD., SAN DIEGO CA 92123
Lucile Blaise officer: President, Sleep & RC Business RESMED INC., 9001 SPECTRUM CENTER BLVD., SAN DIEGO CA 92123
Peter C Farrell director RESMED INC, 14040 DANIELSON STREET, POWAY CA 92064-6857
James Hollingshead officer: President, Sleep Business C/O RESMED INC., 9001 SPECTRUM CENTER BOULEVARD, SAN DIEGO CA 92123
Carol Burt director C/O WELLCARE HEALTH PLANS, INC., 8725 HENDERSON ROAD, TAMPA FL 33634
Resmed Inc director 9001 SPECTRUM CENTER BLVD., SAN DIEGO CA 92123