ResMed
RMD
$253.06
+2.79%
ResMed Inc. designs, manufactures, and distributes respiratory care devices — flow generators, masks, humidifiers, and accessories — for the treatment of obstructive sleep apnea and other respiratory conditions, alongside a growing SaaS portfolio (AirView, Brightree, MatrixCare) serving home medical equipment providers and out-of-hospital care settings. The company is the global duopoly leader in sleep apnea therapy hardware alongside Philips, distinguished by its vertically integrated mask franchise, high recurring resupply revenue, and a digital health platform that supplies clinical adherence data to patients, providers, and payers. The current investor debate centers on whether ResMed can sustain double-digit mask and device growth as GLP-1 obesity drugs reshape the long-term sleep apnea funnel, while competitive noise from Philips' re-entry and the recent $340 million Noctrix Health acquisition (adding a first-in-class restless legs syndrome therapy) frame the growth-versus-disruption narrative. Sentiment has improved markedly since mid-year — RBC Capital upgraded the stock to Outperform on September 15, 2026 — but the Zacks Rank #3 (Hold) and mixed sell-side stance reflect lingering uncertainty over competitive intensity and the durability of margin expansion.…
RMD
ResMed
$253.06
Related headlines
Investment Opinion: Should I buy RMD Today?
Rating: Hold with a constructive bias. The core thesis is that ResMed is a high-quality duopoly franchise with 61% gross margins, 26.9% net margins and ~10% free cash flow yield trading at 18.7x earnings — near the bottom of its multi-year valuation band — but the stock has already rallied 20% in three months to within 5.4% of the $251.99 average analyst target, so the easy money from the re-rating has been made. The consensus 'buy' rating (mean 2.3 across 17 analysts) supports owning the name, but the divided sell-side (Citigroup Neutral, Piper/Wells/Jefferies Hold, Zacks Rank #3) argues against chasing at $238.97. Supporting evidence is strong: revenue grew 8.58% YoY to $1.464B in Q4 FY2026 with clean sequential progression across four quarters; gross margin expanded from 58.6% to a 62.2% peak before a mix-driven 58.8% in Q4; trailing free cash flow was $2.89B ($11.40 per share) against a $28.2B market cap; ROE is 23.1% and ROA 14.0%; and the 18.67x trailing PE sits at a discount to the low-to-mid-20s typical of healthcare equipment peers and far below RMD's own 47.1x in Q1 FY2022. The 12.80x EV/EBITDA and 4.99x PS are modest for a 61%-gross-margin franchise. The biggest risks that could invalidate the thesis are GLP-1-driven structural erosion of sleep apnea demand, Philips' competitive re-entry compressing the 61% gross margin, and margin mix deterioration already visible in the Q4 gross margin dip to 58.84%. This Hold would upgrade to Buy on a pullback toward the $210-$220 zone (roughly 14x forward EPS of $15.61) or on evidence that mask resupply growth is accelerating; it would downgrade to Sell if gross margin falls below 57% for two consecutive quarters or if revenue growth decelerates below 5%. Valuation verdict: fairly valued to modestly undervalued relative to history and peers, but not a compelling entry at current levels after the rally.
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RMD 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on ResMed's 12-month outlook, with a consensus price target around $252.69 and implied upside of -0.1% versus the current price.
Average Target
$252.69
0 analysts
Implied Upside
-0.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$175 - $320
Analyst target range
Coverage is broad and constructive: 17 analysts cover ResMed with a consensus recommendation of "buy" (mean rating 2.3 on a 1-5 scale where lower is more bullish). The average target price is $251.99, implying +5.4% upside from the current $238.97 — a modest but positive signal, and notably the stock has already rallied 20% in three months toward that target. Consensus FY revenue of $7.06 billion (range $6.96B-$7.34B) and EPS of $15.61 (range $15.32-$16.41) imply continued mid-single-digit growth with stable margins. The target range is wide — $175 low to $320 high, a spread of 83% around the average — signaling genuine disagreement about the GLP-1 and competitive impact. The $320 high target assumes multiple re-expansion toward the low-20s PE plus sustained double-digit mask growth and successful integration of Noctrix; the $175 low target prices in margin compression from Philips competition and/or demand erosion from obesity drugs. Institutional ratings show a clear positive inflection: RBC Capital upgraded to Outperform from Sector Perform on September 15, 2026, and KeyBanc has maintained Overweight — but Citigroup downgraded to Neutral from Buy in July and Piper Sandler, Wells Fargo, and Jefferies remain Neutral/Hold/Equal Weight, so the bullish consensus masks a divided sell-side. The recent upgrade pattern tilts positive, but the wide dispersion and the stock's proximity to the average target argue for patience rather than chasing at current levels.
Bulls vs Bears: RMD Investment Factors
The bull case currently has stronger evidence: RMD trades at 18.7x earnings near the bottom of its multi-year valuation band, generates $2.89B of free cash flow, carries a 0.125 debt-to-equity ratio, and has rallied 20% in three months on a +17.40% relative-strength swing with an RBC upgrade as confirmation. The bear case rests largely on a thesis — GLP-1 erosion of the sleep apnea funnel and Philips competition — that has not yet shown up in the numbers, since revenue grew 8.58% and margins remain top-tier. The single most important tension is whether obesity-drug adoption structurally impairs sleep apnea treatment volumes: if it does, the 18.7x multiple is a value trap and the $175 bear target is in play; if it does not, the multiple is a discount that should close toward the low-20s and the $320 high target becomes reachable. Everything else — Philips, Noctrix integration, margin mix — is secondary to that demand question.
Bullish
- Valuation near multi-year lows: At 18.67x trailing and 18.06x forward earnings, RMD trades at a steep discount to its own history (47.1x in Q1 FY2022, 39.4x in Q4 FY2022) and below the low-to-mid-20s typical of healthcare equipment peers. With a 61.1% gross margin, 26.9% net margin and ~10% FCF yield ($2.89B FCF on a $28.2B market cap), the multiple looks inconsistent with the quality of the franchise.
- Fortress balance sheet, high capital returns: Debt-to-equity of just 0.125 and a current ratio of 3.10, with $1.469B of cash at fiscal year-end, give RMD substantial flexibility. The company returned $700.0M in buybacks and $349.7M in dividends in Q4 alone while still funding $350.7M of acquisitions and $156.3M of capex, and the 23% payout ratio leaves room for more.
- Steady revenue growth, expanding margins: Q4 FY2026 revenue of $1.464B grew 8.58% YoY, with a clean sequential progression from $1.336B to $1.423B to $1.431B to $1.464B across the last four quarters. Gross margin climbed from 58.6% in Q4 FY2025 to 61.5% in Q1 FY2026 and 62.2% in Q2 before a mix-driven 58.8% in Q4, and ROE of 23.1% confirms high capital efficiency.
- Momentum inflection and relative strength: The stock is up 20.09% over three months versus SPY's 2.69%, a +17.40% relative strength swing that contrasts sharply with the -27.02% one-year relative strength. The RBC Capital upgrade to Outperform on September 15, 2026 and the recovery from the $182.82 June trough to $238.97 suggest a re-rating is underway.
Bearish
- GLP-1 overhang on sleep apnea funnel: The central debate is whether obesity drugs structurally shrink the sleep apnea patient funnel, and the market's persistent de-rating from 47x to 18.7x PE reflects that fear. The 83% spread between the $175 low and $320 high analyst targets quantifies how unresolved this question remains among the sell-side.
- Divided sell-side, limited near-term upside: Despite the 'buy' consensus, Citigroup downgraded to Neutral in July and Piper Sandler, Wells Fargo and Jefferies remain Neutral/Hold/Equal Weight, while Zacks carries a Rank #3 (Hold). With the stock at $238.97 against a $251.99 average target, only +5.4% remains to consensus after a 20% three-month rally.
- Philips re-entry and competitive intensity: ResMed's duopoly economics depend on Philips' absence from the mask and flow generator market, and Philips' re-entry is cited as a key risk behind the $175 bear target. Competitive pressure could compress the 61% gross margin that underpins the entire earnings base.
- Q4 margin and earnings deceleration: Q4 FY2026 gross margin fell to 58.84% from 62.25% in Q3, and operating income slipped to $448.7M from $454.5M in Q4 FY2025 despite 8.6% higher revenue. R&D rose to $105.7M (7.2% of sales) from $86.4M, and the Noctrix cost base pressures near-term margins.
RMD Technical Analysis
ResMed is in a recovery uptrend within a longer-term corrective structure. The stock is down 11.49% over the trailing year and 2.39% year-to-date, yet the current price of $238.97 sits at roughly 60% of its 52-week range (low $180.27, high $277.67) — well off the lows but still 13.9% below the high, a positioning that suggests improving momentum rather than either overextension or a falling knife. The 180-day price series confirms the pattern: a grinding decline from ~$226 in April to a $182.82 trough on June 2, followed by a persistent stair-step recovery to the $230s-$240s. Recent momentum is decisively positive and accelerating. The stock has gained 20.09% over three months and 4.70% over the past month, versus just 2.69% and 1.22% for SPY — relative strength of +17.40% over three months and +3.48% over one month. That 3-month outperformance sharply diverges from the -27.02% one-year relative strength, a classic mean-reversion signature: the stock was oversold on a 12-month basis and is now being re-rated as fundamentals stabilize. The 6-month change of +4.76% versus SPY's +7.48% shows the recovery is recent rather than entrenched. Key levels are well defined. Support sits at the $180.27 52-week low, with secondary support around the $190-$195 June/July consolidation zone; resistance is the $277.67 52-week high, with the $240-$242 area (the August 28-31 highs and the October 15 close of $242.23) acting as the immediate ceiling the stock is currently testing. A breakout above $242 on volume would confirm the recovery trend and open a path toward the prior high; a breakdown below $190 would invalidate the structure and re-test the lows. With a beta of 0.75, ResMed is roughly 25% less volatile than the market, and its -35.46% max drawdown underscores that defensive characteristics did not insulate it from a sector-wide de-rating — position sizing should account for the stock's tendency toward sharp, sentiment-driven gaps despite low beta.
Beta
0.75
0.75x market volatility
Max Drawdown
-35.5%
Largest decline past year
52-Week Range
$180-$278
Price range past year
Annual Return
-5.0%
Cumulative gain past year
| Period | RMD Return | S&P 500 |
|---|---|---|
| 1m | +14.0% | -1.2% |
| 3m | +29.6% | +3.4% |
| 6m | +15.1% | +7.0% |
| 1y | -5.0% | +14.4% |
| ytd | +3.4% | +12.0% |
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RMD Fundamental Analysis
Revenue is growing at a healthy, stable clip. Fiscal Q4 2026 (quarter ended June 30, 2026) revenue was $1.464 billion, up 8.58% year-over-year, and the trailing four quarters show a clean sequential progression: $1.336B (Q1), $1.423B (Q2), $1.431B (Q3), $1.464B (Q4) — roughly $5.65 billion in annualized revenue with no quarter-to-quarter deterioration. The Sleep and Respiratory segment at $1.256 billion remains the engine (~86% of segment disclosure), while Residential Care Software contributes $166.9 million; the mask resupply franchise is the growth driver per recent commentary, and the Noctrix acquisition adds an adjacent RLS therapy vertical. Growth is steady rather than accelerating, consistent with a mature duopoly — the investment case rests on durable mid-to-high single-digit top-line growth plus operating leverage rather than hypergrowth. Profitability is robust and margins are expanding. Q4 2026 net income was $383.4 million on a 26.2% net margin, with gross margin of 58.84% and operating margin of 30.66%; notably, gross margin has climbed from 58.6% (Q4 2025) through 61.5% (Q1 2026) and 62.2% (Q2 2026) before settling at 58.8% in Q4 — the Q4 dip reflects mix and the Noctrix-related cost base, but the full-year trend is clearly upward. Operating income rose from $454.5 million in Q4 2025 to $448.7 million in Q4 2026 on 8.6% higher revenue, with R&D up to $105.7 million (7.2% of sales) from $86.4 million — investment is being stepped up, which pressures near-term margin but supports the long-term moat. A 26-28% net margin and 61% gross margin are top-tier for medical devices. The balance sheet is fortress-like. Debt-to-equity is just 0.125, the current ratio is 3.10, and cash stood at $1.469 billion at fiscal year-end. Trailing free cash flow was $2.89 billion (FCF per share of $11.40), operating cash flow was $1.806 billion in Q4 alone, and the company returned capital aggressively — $700.0 million in buybacks and $349.7 million in dividends in Q4 — while still funding $350.7 million of acquisitions and $156.3 million of capex. ROE of 23.1% and ROA of 14.0% confirm high capital efficiency; the 1.24% dividend yield with a 23% payout ratio leaves ample room for continued buybacks and bolt-on M&A without external financing.
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 (Q4 2026 net income of $383.4 million; TTM net income of $1.523 billion), the PE ratio is the appropriate primary metric. The stock trades at 18.67x trailing earnings and 18.06x forward earnings — a narrow gap that implies the market expects only modest EPS growth, consistent with the consensus FY estimate of $15.61 (versus the current run-rate). The PEG ratio of 2.00 and EV/EBITDA of 12.80x suggest the multiple is not stretched relative to the company's growth and cash-generation profile. Against the medical devices sector, ResMed screens cheap on several measures: PS of 4.99x, P/B of 4.28x, and EV/Sales of 6.07x are modest for a 61% gross-margin, 26% net-margin franchise, and the 18.7x trailing PE sits at a discount to the broader healthcare equipment group's typical low-to-mid-20s multiple. The discount appears unjustified by fundamentals — ROE of 23.1%, FCF yield of roughly 10% ($2.89B FCF on a $28.2B market cap), and a near-monopoly position in masks — and more likely reflects GLP-1 overhang and Philips competition fears. Historical context is striking: ResMed's PE has compressed from 47.1x in Q1 FY2022 and 39.4x in Q4 FY2022 to 18.4x today, while PS fell from 42.5x to 19.3x (and 4.99x on the current-market-cap basis). The stock is near the bottom of its own multi-year valuation band — a level that historically has coincided with attractive entry points, though it also reflects the market's persistent concern that sleep apnea treatment volumes could be structurally impaired by obesity-drug adoption.
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
Financial and operational risks are modest but not absent. The balance sheet is strong (debt-to-equity 0.125, current ratio 3.10, $1.469B cash), so leverage is not a threat; the real risk is margin mix. Q4 FY2026 gross margin fell to 58.84% from 62.25% in Q3 and 61.46% in Q1, and operating income declined to $448.7M from $454.5M a year earlier despite 8.6% revenue growth, as R&D stepped up to $105.7M (7.2% of sales) from $86.4M. Revenue is also concentrated: the Sleep and Respiratory segment at $1.256B is roughly 86% of segment disclosure, so any mask or flow generator share loss hits the core directly. The Noctrix acquisition ($340M) adds integration and reimbursement risk in an adjacent RLS indication that has not yet contributed revenue. Market and competitive risks center on valuation compression and competitive re-entry. At 18.67x trailing and 18.06x forward earnings, RMD is already cheap versus its own history (47.1x in Q1 FY2022), so further compression would require earnings deterioration rather than multiple normalization — but the PEG of 2.00 and EV/EBITDA of 12.80x leave little cushion if growth slows. Philips' re-entry into sleep devices is the most direct competitive threat to the duopoly economics behind the 61% gross margin, and the 83% spread between the $175 and $320 analyst targets shows the market has no consensus on its impact. With a beta of 0.75 the stock is 25% less volatile than the market, but the -35.46% max drawdown and -27.02% one-year relative strength show that defensive characteristics did not prevent a sentiment-driven de-rating. The worst-case scenario is a GLP-1 demand scare coinciding with visible Philips share gains: mask resupply growth decelerates, gross margin compresses toward the mid-50s, and the multiple stays at 18x or lower on falling estimates. From $238.97, a retest of the $180.27 52-week low would be a -24.6% loss, and the $175 analyst low target implies -26.8%; a break below the $190-$195 June/July consolidation zone would confirm that structure and open the path to those levels. Given the -35.46% historical max drawdown, a 25-30% drawdown in an adverse scenario is a realistic planning assumption rather than a tail event.