Concerns & Risks -- 7/10
A score of 7 reflects a business with strong structural tailwinds, a dominant competitive
position in an underpenetrated market, and improving margin trajectory, offset by a valuation
that -- while reasonable at ~19x forward -- is pricing in continued execution against several
emerging risks (GLP-1 disruption narrative, Philips re-entry, competitive bidding return).
The catalyst pipeline is well-stocked and near-term visibility is strong. The biggest risk is
not fundamental deterioration but rather a shift in the competitive landscape 12-24 months out
that compresses the earnings power the market is extrapolating.
Weight: 15%
Forward P/E (NTM)
19.3x
$11.60 consensus NTM EPS
FCF Yield (LTM)
5.5%
$1.79B LTM FCF on $32.5B mkt cap
GAAP Gross Margin
61.8%
+390 bps over 8 quarters
5-Yr Median P/E
~30x
current 19x = material discount
Peer valuation comparison
| Company | Price | Market Cap | Trailing P/E | Fwd P/E | FCF Yield |
|---|---|---|---|---|---|
| ResMed (RMD) | $224.09 | $32.5B | 22.2x | ~19.3x | ~5.5% |
| Fisher & Paykel (FPH) | NZD ~$37 | ~$14B USD | ~39x | ~33x | ~2.5% |
| Inspire Medical (INSP) | ~$51 | $1.5B | ~10x | N/M | -- |
| Sector Median | -- | -- | ~25x | ~22x | -- |
| Key Takeaway | Material discount to peers and own history | ||||
RMD trades at a material discount to its closest peer (FPH at ~39x trailing) and well below
its own 5-year median P/E of ~30x. The de-rating from ~$294 highs reflects lingering GLP-1
fears and Philips re-entry uncertainty, but the fundamental trajectory is accelerating. At
$224, RMD is priced more like a value stock than a high-quality medical device compounder with
62% gross margins and $1.8B LTM FCF. Data sourced from Daloopa.
Revenue and earnings trajectory (Daloopa)
| Period | Total Rev ($M) | Devices ($M) | Masks & Other ($M) | SaaS ($M) | GAAP GM | Non-GAAP NI ($M) |
|---|---|---|---|---|---|---|
| CQ1 2024 (FQ3 24) | $1,197.0 | $638.2 | $410.8 | $148.0 | 57.9% | $314.4 |
| CQ2 2024 (FQ4 24) | $1,223.2 | $635.1 | $436.2 | $151.9 | 58.5% | $306.3 |
| CQ3 2024 (FQ1 25) | $1,224.5 | $625.8 | $442.0 | $156.8 | 58.6% | $325.4 |
| CQ4 2024 (FQ2 25) | $1,282.1 | $669.3 | $456.3 | $156.5 | 58.6% | $358.3 |
| CQ1 2025 (FQ3 25) | $1,291.7 | $676.2 | $454.4 | $161.2 | 59.3% | $348.5 |
| CQ2 2025 (FQ4 25) | $1,348.0 | $693.9 | $487.1 | $167.0 | 60.8% | $374.5 |
| CQ3 2025 (FQ1 26) | $1,335.6 | $680.3 | $489.1 | $166.1 | 61.5% | $374.9 |
| CQ4 2025 (FQ2 26) | $1,422.8 | $726.2 | $529.7 | $166.9 | 61.8% | $411.5 |
Revenue accelerated from ~$1.2B/quarter to ~$1.42B (11% YoY headline, 9% CC). GAAP gross
margin expanded 390 bps over 8 quarters (57.9% to 61.8%) -- management guides 62-63% for
FY26 and targets double-digit bps improvement annually through 2030. Non-GAAP net income
grew from $314M to $412M (31% cumulative). Masks grew 14% CC in FQ2 26 on new fabric mask
launches. LTM FCF of $1.79B,
up from $1.09B two years ago
-- a 64% increase. Data sourced from Daloopa.
Key catalysts (bull case)
| # | Catalyst | Detail | Timeline | Impact |
|---|---|---|---|---|
| 1 | GLP-1 as Tailwind | 1.95M patient claims dataset shows GLP-1+CPAP patients are 10-11% more likely to start CPAP, 6% more likely to resupply at 3 years. Oral GLP-1s will expand the addressable population entering the sleep apnea funnel. Management describes GLP-1 headwind thesis as "completely gone." | 2026-2028 | HIGH |
| 2 | Gross Margin Expansion | Guided 62-63% for FY26; targeting double-digit bps improvement annually through 2030. Drivers: component cost improvements, manufacturing efficiencies, mix shift to higher-margin masks, Calabasas expansion doubling US mfg capacity. 100 bps on ~$5.6B rev = ~$56M incremental gross profit. | FY26-FY30 | HIGH |
| 3 | Competitive Bidding Exclusion | CPAP/APAP/bilevel excluded from CMS competitive bidding for first time in 15 years. Next bidding window late summer 2026 for contracts effective Jan 2028, but CPAP currently excluded. Removes the single largest reimbursement overhang that historically depressed the stock 20-30%. | Through 2028+ | HIGH |
| 4 | PCP Channel Expansion | 60,000+ CME trainings completed (50% QoQ increase), 77% of providers intend to change clinical practice. PCPs see 80% of patients before specialist referral; unlocking this channel could meaningfully expand the diagnostic funnel. | 2026-2028 | MOD-HIGH |
| 5 | Big Tech Wearable Detection | Apple Watch, Samsung Galaxy Watch already launched sleep apnea detection. CEO predicts 1-3 more wearable companies (Whoop, Garmin, Oura, Ultrahuman) will add FDA-cleared detection. Drives top-of-funnel awareness at zero cost to ResMed. | 2026-2027 | MOD-HIGH |
| 6 | Fabric Mask Cycle (F30i) | First compact full-face fabric masks from ResMed; early adoption very positive. Mask cycles historically drive share gains and ASP uplift; masks are highest-margin recurring revenue. | H2 FY26-FY27 | MODERATE |
| 7 | Share Repurchase Acceleration | $600M+ buyback in FY26 (up from historical pace); $175M repurchased in FQ2 26 alone at depressed prices around $225-250. ~1.8% of market cap; accretive at current FCF yield of 5.5%. | FY26 | LOW-MOD |
| 8 | AI-Enabled Therapy / Brain Health | Comfort Match: first FDA-cleared AI medical device for ResMed; improves adherence beyond 87% day-90. JAMA Neurology study links OSA to Parkinson/dementia risk -- shifts narrative from quality-of-life to life-saving therapy. | 2026-2027 | MODERATE |
Key risks (bear case)
| # | Risk | Severity | Probability | Detail / Mitigants |
|---|---|---|---|---|
| 1 | Philips US Re-Entry | MED-HIGH | MEDIUM | Philips CEO says timing unknown; Thailand mfg for US market. Must rebuild from #3/#4 vs. competitors who filled the gap. In ex-US markets where Philips returned, RMD sustained 5% CC device growth. Ecosystem (myAir 11M users, AirView, Brightree) very difficult to replicate. |
| 2 | GLP-1 Clinical Data Evolution | MEDIUM | LOW-MED | SURMOUNT-OSA showed tirzepatide reduced AHI by 63% in obese OSA patients. Current evidence shows GLP-1s complement CPAP (combination therapy is best). GLP-1 adherence only 30-40% at 1 year vs. 87% for CPAP at day 90. Weight loss alone does not cure structural upper airway anatomy. |
| 3 | Competitive Bidding Reintroduction | HIGH (if incl.) | LOW | CMS relaunching DMEPOS competitive bidding; CPAP currently excluded. Historical precedent: prior rounds failed to generate expected savings in 13 of 15 DME categories. RMD navigated prior rounds and grew through them. |
| 4 | SaaS Growth Deceleration | MEDIUM | MED-HIGH | Residential care software grew only 5% CC in FQ2 26; senior living and long-term care facing labor/reimbursement headwinds. Management targeting return to high single-digit growth in FY27. SaaS is ~12% of revenue so total company impact is modest. |
| 5 | Tariff / Trade Policy | MEDIUM | LOW | Manufactures in Australia and Singapore. Nairobi Protocol provides tariff relief for chronic respiratory disability devices; exemption has held for decades. Actively building US manufacturing (Calabasas, Indiana DC). Management: financial impact would not be "material." |
| 6 | FX Headwinds | LOW-MED | MEDIUM | ~45% of revenue from ex-US markets; FX was a $25M tailwind in FQ2 26 but could reverse. Natural hedge from Australian cost base; active hedging program. |
| 7 | Key Customer Concentration | LOW-MED | LOW | Large DME providers (Apria/Owens & Minor, AdaptHealth, Rotech) represent significant US distribution share. RMD invests in Brightree software that makes DMEs more efficient; competitive bidding exclusion reduces financial stress on partners. |
Competitive landscape
| Competitor | Threat Level | Status / Notes |
|---|---|---|
| Philips Respironics | MEDIUM (rising) | Out of US device market since 2021 recall; back in ~100+ ex-US countries. Must rebuild trust, distribution, and market position. Manufacturing in Thailand. $1.1B+ recall settlements overhang. |
| Fisher & Paykel (FPH) | MEDIUM | Strong #2 in masks globally; growing share in devices. Trades at ~39x P/E vs. RMD 22x despite slower revenue growth. Less competitive in connected ecosystem. |
| Inspire Medical (INSP) | LOW-MED (declining) | Hypoglossal nerve stimulation for OSA. Stock down ~66% over past year; guidance cut; reimbursement uncertainty. Surgical approach remains niche (severe OSA, CPAP-intolerant only). |
| GLP-1 Pharma (Lilly, Novo) | LOW (net positive) | Tirzepatide FDA-approved for OSA in obese patients. Clinical data shows combination therapy superior to GLP-1 alone. GLP-1s driving MORE patients into CPAP funnel. Low GLP-1 adherence at 1 year (30-40%). |
Implied returns math
| Scenario | FY27E EPS | Exit Multiple | Target Price | Implied Return |
|---|---|---|---|---|
| Bull | $12.00 | 25x | ~$300 | +34% |
| Base | $11.60 | 22x | ~$255 | +14% |
| Mean Reversion | $11.60 | 25x | ~$290 | +29% |
| Bear | $10.80 | 17x | ~$184 | -18% |
Risk/reward appears skewed favorably at current levels. At consensus FY27 EPS midpoint of
$11.60, a 22x exit multiple (current NTM) implies ~$255, or ~14% upside over ~15 months.
Mean reversion toward the historical 25x multiple implies ~29% upside. The bear case at 17x
on depressed earnings requires Philips re-entry, GLP-1 monotherapy sufficiency for mild OSA,
and competitive bidding reintroduction -- a multi-factor negative confluence.
Scenario analysis
| Scenario | Target Range | Upside/Downside | Key Assumptions |
|---|---|---|---|
| Bull (25x FY27E) | ~$300 | +34% | GLP-1 tailwind quantified and accelerates new patient flow 5-10%. Gross margins reach 63-64%. Philips re-entry delayed or poorly executed. PCP channel and wearable detection create new structural demand layer. Multiple re-rates toward historical 25-30x as GLP-1 fear premium fully lifts. |
| Base (22x FY27E) | ~$255 | +14% | Continued 8-10% revenue growth, 15%+ EPS growth. Gross margin expansion to 62-63% as guided. Philips re-entry has modest ex-US impact, delayed in US. GLP-1 narrative remains net neutral to slight positive. Valuation stays at current discount to history. |
| Bear (17x FY27E) | ~$184 | -18% | Philips re-enters US within 12 months and competes on price. GLP-1 clinical data shows monotherapy sufficient for mild-moderate OSA. Competitive bidding reintroduced for CPAP in 2028. SaaS growth remains sub-5%, dragging blended growth. Multiple compresses further on competitive fears. |
Score rationale
Score of 7/10 reflects a dominant market position in a massive underpenetrated market with several well-stocked catalysts, offset by valuation that prices in continued execution and emerging competitive risks.
Why 7 and not higher: The 24% drawdown from 52-week highs signals the market has real concerns, and the Philips re-entry timeline remains genuinely uncertain. GLP-1 clinical data is evolving rapidly; the SURMOUNT-OSA trial showed dramatic AHI reductions that, if replicated more broadly, could narrow the addressable market for mild OSA. SaaS segment (~15% of revenue) is underperforming with portfolio management headwinds that may persist through FY27. Valuation at 19x forward is not expensive, but it is not screaming buy either -- it prices in continued solid execution.
Why 7 and not lower: Dominant position in massive underpenetrated market (~80% of OSA patients untreated, ~1B people globally). Gross margin expanding 300+ bps/year with management targeting continued improvement through 2030. LTM FCF of $1.8B growing at 20%+ annually; FCF yield of 5.5% provides strong shareholder return foundation. Competitive bidding exclusion removes the single largest historical risk factor. GLP-1 real-world data (1.95M patients) consistently shows it is a tailwind, not headwind. Tariff risk largely neutralized via Nairobi Protocol and US manufacturing expansion. Connected ecosystem (myAir 11M users, AirView, Brightree) creates substantial switching costs and competitive moat. Trading at meaningful discount to both its closest peer (FPH ~39x) and its own 5-year median (~30x).
Analysis as of April 4, 2026. Price: $224.09. Data sourced from Daloopa.