ResMed
RMD
$225.98
+2.40%
ResMed Inc. is a global respiratory care device company that develops and manufactures flow generators, masks, and accessories for the treatment of sleep apnea and other respiratory conditions, complemented by a growing residential care software business. The company is one of the two dominant players in the sleep apnea device market, alongside Philips, and has increasingly differentiated itself through digital health capabilities that deliver clinical data to patients, providers, and payers in out-of-hospital settings. The current investor narrative centers on the durability of ResMed's mask and consumables franchise, which continues to post strong growth, versus intensifying competitive pressures in the flow generator market and the stock's significant underperformance relative to the broader market over the past year. Recent strategic actions, including the $340 million acquisition of Noctrix Health to add a first-in-class non-invasive therapy for Restless Legs Syndrome and the divestiture of non-core assets, signal management's intent to broaden the addressable market while sharpening focus on core sleep and respiratory care.…
RMD
ResMed
$225.98
Related headlines
Investment Opinion: Should I buy RMD Today?
Rating: Hold. ResMed presents a balanced risk-reward profile: the stock is deeply undervalued relative to its historical PE range (18.67x vs. a historical band of 18.4x-49.7x) and offers a 14.3% upside to the analyst average target of $250.22, but near-term momentum is weak and gross margins are compressing. The consensus 'buy' rating (mean 2.3) and 17 analysts covering the stock suggest the Street sees value, but the wide target range ($175-$320) and recent downgrades (Citigroup to Neutral) indicate caution.
The supporting evidence for a Hold is mixed. On the positive side, RMD generates $2.89 billion in trailing free cash flow (10.2% FCF yield), has a debt-to-equity ratio of just 0.125, and trades at a forward PE of 16.54x, which is a discount to the medical device sector average of 20x-25x. Revenue grew 8.58% YoY in Q4 FY2026, and the company returned $1.05 billion to shareholders via buybacks and dividends. However, the gross margin decline from 62.2% to 58.8% sequentially and the stock's 20.88% annual decline are concerning. The PEG ratio of 2.00x suggests the stock is not cheap relative to its growth rate.
The biggest risks that could invalidate the Hold rating are: (1) continued gross margin compression below 58%, which would pressure earnings; (2) market share losses in the flow generator segment to competitors like Philips; and (3) a breakdown below the 52-week low of $180.27, which would signal a deeper bearish trend. The rating would upgrade to Buy if gross margins stabilize above 60% and revenue growth accelerates above 10%, or downgrade to Sell if gross margins fall below 55% or revenue growth decelerates below 5%. Relative to its history and peers, RMD appears undervalued, but the market is pricing in structural concerns that need to be resolved.
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RMD 12-Month Price Forecast
ResMed is a high-quality medical device company trading at a historically low valuation, but near-term headwinds are significant. The stock's 20.88% annual decline and 35.9 percentage point underperformance versus the S&P 500 reflect market concerns about competitive pressures and margin compression. However, the 10.2% free cash flow yield, 26.9% net margin, and 23.1% ROE demonstrate the underlying business remains robust. The key question is whether the gross margin decline is temporary or structural; if margins stabilize, the stock could re-rate toward $250-$260, but if compression continues, downside to $175-$190 is possible. I would upgrade to bullish if gross margins recover above 62% and revenue growth accelerates above 10%, and downgrade to bearish if gross margins fall below 55% or the stock breaks below $180.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on ResMed's 12-month outlook, with a consensus price target around $250.22 and implied upside of +10.7% versus the current price.
Average Target
$250.22
0 analysts
Implied Upside
+10.7%
vs. current price
Analyst Count
—
covering this stock
Price Range
$175 - $320
Analyst target range
ResMed is covered by 17 analysts with a consensus recommendation of "buy" (mean rating of 2.3 on a scale where 1 is strong buy and 5 is strong sell), and an average price target of $250.22. This implies approximately 14.3% upside from the current price of $218.89 to the consensus target, indicating that the analyst community sees meaningful value at current levels despite the stock's poor recent performance. The consensus leans moderately bullish, though the distribution of ratings includes several neutral and hold recommendations, reflecting the balanced risk-reward perceived by the Street.
The target price range spans from a low of $175 to a high of $320, a wide spread of $145 that signals significant disagreement about the company's trajectory. The high target of $320 implies roughly 46% upside and likely assumes successful integration of the Noctrix acquisition, accelerating mask growth, and multiple expansion back toward historical averages. The low target of $175, which is below the current 52-week low of $180.27, prices in continued competitive pressures, margin compression, and potential market share losses. Recent institutional actions show a mix of upgrades and downgrades: RBC Capital upgraded the stock to Outperform from Sector Perform on September 15, 2026, while Citigroup downgraded to Neutral from Buy on July 13, 2026, and KeyBanc maintained its Overweight rating. The wide target spread and mixed analyst actions suggest high uncertainty, and the elevated short ratio of 10.58 days indicates that bearish sentiment remains a significant factor that could amplify volatility in either direction.
Bulls vs Bears: RMD Investment Factors
The bear case currently has stronger near-term evidence, given the stock's 20.88% annual decline, 35.9 percentage point underperformance versus the S&P 500, and recent gross margin compression from 62.2% to 58.8%. However, the bull case rests on a compelling valuation argument: at 18.67x trailing PE and 16.54x forward PE, RMD trades near the bottom of its historical range and at a discount to the medical device sector average of 20x-25x. The most important tension in the investment debate is whether the gross margin decline is a temporary blip or a structural issue reflecting competitive pressures; if margins stabilize and the Noctrix acquisition contributes, the stock could re-rate toward its historical PE range, but if margin erosion continues, the low valuation could prove justified.
Bullish
- Deep valuation discount to history: RMD trades at a trailing PE of 18.67x, near the bottom of its multi-year historical band (which has ranged from 18.4x to 49.7x), and well below the 22x-30x range seen for much of 2023-2025. The forward PE of 16.54x implies the market expects only 12.9% earnings growth, despite the company's consistent mid-single-digit revenue growth and 26.9% net margin.
- Strong cash generation and balance sheet: RMD generated $2.89 billion in trailing free cash flow, a 10.2% FCF yield, and holds $1.469 billion in cash with a debt-to-equity ratio of just 0.125 and a current ratio of 3.10. The company returned $700 million via buybacks and $350 million in dividends in FY2026, demonstrating ample capacity for continued shareholder returns and M&A.
- Analyst consensus sees 14% upside: 17 analysts have a consensus 'buy' rating (mean 2.3) with an average price target of $250.22, implying 14.3% upside from the current $218.89. The high target of $320 suggests 46% upside if the company executes on mask growth and successful Noctrix integration.
- Defensive low-beta profile: RMD's beta of 0.766 means it is roughly 23% less volatile than the broader market, atypical for a healthcare name. This defensive characteristic may appeal to risk-averse investors, and the stock's 4.42% gain over the past three months (vs. S&P 500's 3.34%) shows it can outperform in certain market environments.
Bearish
- Severe relative underperformance: RMD is down 20.88% over the past year while the S&P 500 gained 15.01%, a relative underperformance of 35.9 percentage points. The stock is trading at just 37% of its 52-week range ($180.27-$284.87), reflecting a market that has significantly de-rated the stock.
- Gross margin compression: Gross margin declined sequentially from 62.2% in Q3 FY2026 to 58.8% in Q4 FY2026, a 340 basis point drop. This could signal pricing pressure, unfavorable product mix, or rising manufacturing costs, and warrants close monitoring as it directly impacts profitability.
- Elevated short interest and weak momentum: The short ratio of 10.58 days indicates significant bearish sentiment, and the stock is down 5.19% over the past month, underperforming the S&P 500's 0.59% gain by 5.78 percentage points. This persistent negative momentum suggests caution rather than a clear bottoming signal.
- PEG ratio suggests growth is priced in: The PEG ratio of 2.00x indicates the stock is not cheap relative to its growth rate, despite the low absolute PE. With revenue growth at 8.58% YoY and EPS growth expected at 12.9%, the market may be adequately pricing in the company's growth prospects.
RMD Technical Analysis
ResMed is in a sustained downtrend over the trailing twelve months, with the stock down 20.88% versus a 15.01% gain for the S&P 500, a relative underperformance of roughly 35.9 percentage points. At the current price of $218.89, the stock sits at approximately 37% of its 52-week range of $180.27 to $284.87, meaning it is trading much closer to its annual low than its high. This positioning reflects a market that has de-rated the stock significantly, and while it can signal value opportunity, the persistent negative momentum suggests caution rather than a clear bottoming signal. The max drawdown of -35.46% over the period underscores the severity of the correction from prior highs.
Short-term momentum remains weak but shows signs of stabilization: the stock is down 5.19% over the past month and down 2.32% over six months, yet it has gained 4.42% over the past three months, indicating a modest recovery attempt from the June lows near $182. The one-month decline of 5.19% compares unfavorably to the S&P 500's 0.59% gain, producing a relative strength of -5.78% for the month, while the three-month relative strength of +1.08% shows the stock has marginally outperformed the index over that shorter window. This divergence between weak one-month and positive three-month relative performance suggests the stock may be consolidating after a sharp selloff rather than entering a new leg down. Volume of approximately 899,000 shares is relatively light, and the short ratio of 10.58 days indicates elevated short interest that could fuel a squeeze on any positive catalyst.
Key technical support rests at the 52-week low of $180.27, which also aligns with the June 2026 trough area around $182-$186, while resistance is established at the 52-week high of $284.87, with intermediate resistance near the $240 level where the stock peaked in late August 2026. A breakdown below $180 would signal a continuation of the bearish trend and likely trigger further selling, whereas a sustained breakout above $240 could mark a trend reversal and open the path toward the $260-$285 zone. The beta of 0.766 indicates the stock is roughly 23% less volatile than the broader market, which is atypical for a healthcare name and suggests defensive characteristics that may appeal to risk-averse investors, though it also means the stock may lag in strong market rallies.
Beta
0.75
0.75x market volatility
Max Drawdown
-35.5%
Largest decline past year
52-Week Range
$180-$285
Price range past year
Annual Return
-20.2%
Cumulative gain past year
| Period | RMD Return | S&P 500 |
|---|---|---|
| 1m | -1.0% | +0.9% |
| 3m | +8.4% | +3.4% |
| 6m | -1.3% | +14.4% |
| 1y | -20.2% | +16.2% |
| ytd | -7.7% | +14.0% |
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RMD Fundamental Analysis
ResMed's revenue trajectory remains solidly positive, with the most recent quarter (Q4 FY2026, ended June 30, 2026) delivering $1.464 billion in revenue, representing 8.58% year-over-year growth from $1.348 billion in the prior-year quarter. Sequentially, revenue has grown from $1.336 billion in Q1 FY2026 to $1.431 billion in Q3 and $1.464 billion in Q4, demonstrating consistent quarter-over-quarter expansion. The Sleep and Respiratory segment dominates with $1.256 billion in revenue, while the Residential Care Software segment contributes $167 million, and the strong mask segment growth highlighted in recent analyst commentary suggests the consumables franchise is the primary growth engine. This steady mid-to-high single-digit growth profile is characteristic of a mature but structurally growing medical device market, supported by increasing sleep apnea diagnosis rates, aging populations, and rising obesity prevalence.
Profitability is robust, with Q4 FY2026 net income of $383.4 million on a 26.2% net margin, and gross margin of 58.8% for the quarter, though this represents a slight compression from the 62.2% gross margin reported in Q3 FY2026 and the 62.2% in Q2 FY2026. The trailing twelve-month net margin stands at 26.9% and the operating margin at 33.5%, both healthy for the medical device industry, where gross margins typically range from 55% to 70%. The sequential gross margin decline from 62.2% to 58.8% warrants monitoring, as it could reflect product mix shifts, pricing pressure, or higher manufacturing costs, though the company remains solidly profitable with EBITDA of $493 million in the most recent quarter.
The balance sheet is exceptionally strong, with a debt-to-equity ratio of just 0.125 and a current ratio of 3.10, indicating ample liquidity and minimal leverage. Free cash flow for the trailing twelve months is $2.89 billion, and the company generated $1.805 billion in operating cash flow in FY2026 while returning capital through $700 million in stock repurchases and $350 million in dividends. The ROE of 23.1% and ROA of 14.0% demonstrate efficient capital deployment, and the cash flow to debt ratio of 2.19x confirms the company can easily service its obligations. With $1.469 billion in cash at the end of the period and a free cash flow yield of approximately 10.2% (based on the $2.89 billion FCF and $28.2 billion market cap), ResMed is fully self-funding and has substantial capacity for continued M&A and shareholder returns.
Quarterly Revenue
$1.5B
2026-06
Revenue YoY Growth
+8.6%
YoY Comparison
Gross Margin
58.8%
Latest Quarter
Free Cash Flow
$2.9B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is RMD Overvalued?
Because ResMed is solidly profitable with positive net income of $383 million in the most recent quarter and trailing EPS of $2.65, the PE ratio is the appropriate primary valuation metric. The stock trades at a trailing PE of 18.67x and a forward PE of 16.54x, with the gap between the two implying the market expects earnings growth of approximately 12.9% over the next year. This forward PE compression from trailing levels suggests the market is pricing in modest but not aggressive earnings expansion, which is consistent with the company's mid-single-digit revenue growth and stable margin profile.
Relative to the broader medical devices sector, where the average PE typically ranges from 20x to 25x, ResMed's trailing PE of 18.67x represents a discount of roughly 7% to 25% depending on the peer set. The PS ratio of 4.99x and EV/EBITDA of 12.84x also appear reasonable for a company with 26.9% net margins and 23.1% ROE, suggesting the market is not assigning a premium for ResMed's market leadership and cash generation. The PEG ratio of 2.00x, however, indicates the stock is not cheap relative to its growth rate, which may explain the muted valuation despite strong fundamentals.
Historically, ResMed's PE ratio has ranged from a low of approximately 18.4x (current) to a high of 49.7x in early 2022, with the stock having traded in the 22x-30x range for much of 2023-2025. The current PE of 18.67x is near the bottom of its multi-year historical band, which could signal either a value opportunity or a reflection of structural concerns about competitive pressures and slowing growth. The PS ratio of 4.99x is also well below the 19x-42x range seen in 2021-2022, though those levels reflected a period of pandemic-driven premium valuations. The current valuation suggests the market has significantly reset expectations for ResMed, and any positive catalyst could drive multiple expansion back toward historical norms.
PE
18.7x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 18x~50x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.8x
Enterprise Value Multiple
Investment Risk Disclosure
ResMed's financial and operational risks are relatively contained but not negligible. The debt-to-equity ratio of 0.125 and current ratio of 3.10 indicate a fortress balance sheet, and trailing free cash flow of $2.89 billion provides ample coverage. However, the sequential gross margin decline from 62.2% in Q3 FY2026 to 58.8% in Q4 FY2026 is a red flag; if this compression persists, it could erode the company's 26.9% net margin and 33.5% operating margin. Additionally, revenue growth of 8.58% YoY, while solid, is dependent on the sleep and respiratory segment, which contributed $1.256 billion of the $1.464 billion in Q4 revenue; any slowdown in mask or flow generator sales would disproportionately impact overall growth.
Market and competitive risks are significant given the stock's recent underperformance. RMD trades at a trailing PE of 18.67x, which is below the medical device sector average of 20x-25x, but the PEG ratio of 2.00x suggests the market is not undervaluing growth. The beta of 0.766 indicates lower volatility than the market, but this also means the stock may lag in strong rallies. Competitive pressures from Philips and other players in the flow generator market could intensify, and the Zacks Rank #3 (Hold) reflects these concerns. Regulatory headwinds, such as potential changes to reimbursement policies for sleep apnea devices, could also weigh on the stock.
The worst-case scenario for RMD would involve a combination of continued gross margin erosion, market share losses in the flow generator segment, and a broader market rotation away from healthcare. In this scenario, the stock could retest its 52-week low of $180.27, representing a 17.6% decline from the current price of $218.89. If the bear case fully materializes and the stock falls to the analyst low target of $175, that would be a 20.1% loss. A more severe downturn, such as a recession that delays elective sleep studies and reduces demand for devices, could push the stock below $175, potentially toward $160, implying a 27% decline from current levels.
FAQ
The key risks for RMD are: (1) Financial risk: gross margin declined from 62.2% to 58.8% sequentially, and if this compression continues, it could erode the 26.9% net margin. (2) Competitive risk: intensifying competition in the flow generator market, particularly from Philips, could lead to market share losses. (3) Macro risk: with a beta of 0.766, RMD is less volatile than the market, but a broader economic downturn could reduce demand for elective sleep studies. (4) Company-specific risk: the wide analyst target range ($175-$320) and elevated short ratio of 10.58 days indicate significant uncertainty and bearish sentiment. The most severe risk is a breakdown below the 52-week low of $180.27, which could trigger further selling.
Our 12-month forecast for RMD includes three scenarios: Bull case (25% probability, $280-$320) assumes successful Noctrix integration, margin recovery above 62%, and multiple expansion. Base case (55% probability, $240-$260) assumes 7-9% revenue growth, stable margins around 60-61%, and gradual recovery toward the analyst average target of $250.22. Bear case (20% probability, $175-$190) assumes continued margin compression, competitive pressures, and a break below the 52-week low of $180.27. The base case is most likely, with the key assumption being that gross margins stabilize after the Q4 dip. The analyst consensus target of $250.22 aligns with our base case, implying 14.3% upside from current levels.
RMD appears undervalued relative to its history and peers. The trailing PE of 18.67x is near the low end of its multi-year range (18.4x-49.7x) and below the medical device sector average of 20x-25x. The forward PE of 16.54x implies the market expects only 12.9% earnings growth, which seems conservative given the company's 26.9% net margin and 23.1% ROE. However, the PEG ratio of 2.00x indicates the stock is not cheap relative to its growth rate, and the PS ratio of 4.99x is well below the 19x-42x range seen in 2021-2022. The market is pricing in structural concerns about competitive pressures and margin compression, which may be overdone if the company executes on its strategic initiatives.
RMD presents a mixed risk-reward profile. On the positive side, the stock trades at a trailing PE of 18.67x, near the bottom of its historical range, and offers a 14.3% upside to the analyst average target of $250.22. The company generates $2.89 billion in free cash flow (10.2% yield) and has a debt-to-equity ratio of just 0.125. However, the stock is down 20.88% over the past year, gross margins declined from 62.2% to 58.8% sequentially, and the PEG ratio of 2.00x suggests growth is priced in. For value-oriented investors with a medium-term horizon, RMD could be a good buy on further weakness, but near-term momentum and margin trends warrant caution.
RMD is better suited for long-term investment (minimum 2-3 years) rather than short-term trading. The company operates in a structurally growing market for sleep apnea treatment, driven by aging populations and rising obesity rates, and has a strong consumables franchise that generates recurring revenue. The beta of 0.766 indicates lower volatility, making it less ideal for short-term traders seeking high-beta momentum plays. The dividend yield of 1.24% and consistent free cash flow of $2.89 billion provide income and stability for long-term holders. However, near-term headwinds such as gross margin compression and competitive pressures could keep the stock range-bound in the short term, so investors should be prepared for volatility and focus on the long-term growth story.