ResMed (NYSE: RMD) and Illumina (NASDAQ:ILMN) are both large-cap medical companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, valuation, dividends, analyst recommendations, institutional ownership and profitability.

Institutional and Insider Ownership

61.4% of ResMed shares are owned by institutional investors. Comparatively, 92.1% of Illumina shares are owned by institutional investors. 1.8% of ResMed shares are owned by company insiders. Comparatively, 0.9% of Illumina shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
ResMed 12.98% 22.75% 12.86%
Illumina 26.56% 21.52% 11.94%

Dividends

ResMed pays an annual dividend of $1.40 per share and has a dividend yield of 1.5%. Illumina does not pay a dividend. ResMed pays out 70.0% of its earnings in the form of a dividend. Illumina has raised its dividend for 2 consecutive years.

Risk and Volatility

ResMed has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, Illumina has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500.

Earnings & Valuation

This table compares ResMed and Illumina’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ResMed $2.07 billion 6.30 $342.28 million $2.00 45.53
Illumina $2.75 billion 11.52 $726.00 million $4.93 44.05

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

Analyst Ratings

This is a breakdown of current ratings and recommmendations for ResMed and Illumina, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ResMed 3 5 3 0 2.00
Illumina 1 6 13 0 2.60

ResMed currently has a consensus price target of $68.80, suggesting a potential downside of 24.44%. Illumina has a consensus price target of $242.18, suggesting a potential upside of 11.50%. Given Illumina’s stronger consensus rating and higher probable upside, analysts clearly believe Illumina is more favorable than ResMed.

Summary

Illumina beats ResMed on 11 of the 16 factors compared between the two stocks.

About ResMed

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.

About Illumina

Illumina, Inc. (Illumina) is a provider of sequencing- and array-based solutions for genetic analysis. The Company operates through two segments: Core Illumina and the consolidated variable interest entities (VIEs), which include the activities of GRAIL, Inc. (GRAIL) and Helix Holdings I, LLC (Helix). Core Illumina consists of its core operations. Core Illumina’s products and services serve customers in the research, clinical and applied markets, and enable the adoption of a range of genomic solutions. The Company’s portfolio of integrated systems, consumables and analysis tools addresses the range of genomic complexity, price points, and throughput, enabling customers to select the solution for their research or clinical challenge. The Company provides reproductive-health solutions, including noninvasive prenatal testing (NIPT), preimplantation genetic screening and diagnosis, and neonatal and genetic health testing.

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