Vivos Therapeutics vs. ResMed: Which Sleep Apnea Stock is a Better Buy?

ResMed Inc. (RMD) develops, manufactures, distributes, and markets medical devices and cloud-based software applications for the healthcare markets. The company operates in two segments: Sleep and Respiratory Care and Software as a Service. On the other hand, Vivos Therapeutics, Inc. (VVOS) is a medical technology company that develops and commercializes treatment alternatives for patients with sleep-disordered breathing, such as mild-to-moderate obstructive sleep apnea.

As the healthcare sector’s focus has been shifting on treating several diseases that lacked enough attention last year due to the COVID-19 pandemic, the sleep apnea devices industry should witness significant growth this year. While supply chain issues are still a major concern, the surging sleep apnea cases and geriatric population have been leading to solid demand. The industry should keep growing with increasing awareness of the condition, a rising need for diagnostic testing, and rapid innovation. According to a Fortune Business Insights report, the global sleep apnea devices market is expected to grow at a 7.1% CAGR by 2028. Therefore, both RMD and VVOS should benefit.

VVOS has gained 14.7% over the past month, while RMD has negative returns. However, RMD’s 14.6% gains over the past year compared to VVOS’ negative returns. Moreover, RMD is the clear winner with 23.5% gains versus VVOS’ negative returns in terms of the past nine months’ performance.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On January 27, 2022, Mick Farrell, RMD’s CEO, said, “We are investing in medical device research and development, as well as digital health innovation that will unlock value across the healthcare system.”

On January 27, 2022, VVOS announced filing a U.S. patent application related to specific new and enhanced clinical methods and protocols developed within its proprietary Vivos Method treatment for OSA. VVOS’ Chairman and CEO Kirk Huntsman “We believe these new methods and protocols are not only patentable but will enhance the positive experience that Vivos Method patients have reported.”

Recent Financial Results

RMD’s revenues increased 12% year-over-year to $894.90 million for the fiscal second quarter ended December 31, 2021. The company’s non-GAAP net income grew 5% year-over-year to $216.20 billion. Also, its non-GAAP EPS came in at $1.47, up 4% year-over-year.

RMD’s revenues increased 38.1% year-over-year to $4.55 million for the fiscal third quarter ended September 30, 2021. However, its net loss grew 200.8% year-over-year to $5.45 million. Also, its loss per share came in at $0.26, up 52.9% year-over-year.

Expected Financial Performance

Analysts expect RMD’s revenue to increase 17.3% for the quarter ending March 31, 2022, and 17% in fiscal 2022. The company’s EPS is expected to grow 10% for the quarter ending March 31, 2022, and 14.6% in 2022.

On the other hand, VVOS’ revenue is expected to increase 53.7% for the quarter ending March 31, 2022, and 42.8% in fiscal 2022. Its EPS is expected to decline 36.8% for the quarter ending March 31, 2022, but grow 4.4% in fiscal 2022.

Profitability

RMD’s trailing-12-month revenue of $3.44 billion is significantly higher than VVOS’ $15.80 million. RMD is also more profitable with an EBITDA margin and net income margin of 31.56% and 15.16%, respectively, compared to VVOS’ negative returns.

Furthermore, RMD’s ROE, ROA, and ROTC are 17.37%, 13.10%, and 15.61% compared to VVOS’ negative values.

Valuation

In terms of trailing-12-month P/S, RMD is currently trading at 9.67x, 226.7% higher than VVOS’ 2.96x. Moreover, RMD’s trailing-12-month EV/S ratio of 9.36x is 392.6% higher than VVOS’ 1.90x.

So, VVOS is relatively affordable here.

POWR Ratings

RMD has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, VVOS has an overall rating of D, which translates to a Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

RMD has a B grade for Growth, consistent with analysts’ expectations that its EPS will increase in the upcoming months. On the other hand, VVOS has a C grade for Growth, in sync with analysts’ expectations that its EPS will decline in the near term.

Moreover, RMD has a grade of B for Quality. This is justified given RMD’s 28.33% trailing-12-month EBIT margin, significantly higher than the industry average of 2.32%. On the other hand, VVOS has a Quality grade of D, in sync with its negative trailing-12-month EBIT margin, compared to the industry average of 2.32%.

Of the 165 stocks in the Medical - Devices & Equipment industry, RMD is ranked #31. In comparison, VVOS is ranked #122.

Beyond what I’ve stated above, we have also rated the stocks for Value, Stability, Momentum, and Sentiment. Click here to view all the RMD ratings. Also, get all the VVOS ratings here.

The Winner

The sleep apnea devices industry is expected to grow exponentially with increasing demand this year and beyond. While both RMD and VVOS are expected to gain, it is better to bet on RMD now because of its higher profit margin and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Medical - Devices & Equipment industry here.

RMD shares . Year-to-date, RMD has declined -8.94%, versus a -3.71% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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