ResMed Inc. (RMD): what the price requires
At today's price, ResMed Inc. (RMD) is priced for +5.5% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/RMD
Headline
| Field | Value |
|---|---|
| Ticker | RMD |
| Company | ResMed Inc. |
| Current price | $198.59/sh |
| Composition | Devices 52% / Masks and other 36% / Residential Care Software 12% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 6.5% |
| Operating margin today | 34.0% |
| Margin compression implied | -27.5pp |
| Implied growth | 5.5% |
| Multiple paid | 15x operating income |
The operating-margin requirement is derived from the framework's value band at year 10, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -1.08σ |
| cohort percentile (of 112 peers) | 26 |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.76x | 5 | expensive |
| Earnings | 1.55x | 5 | expensive |
| Relative | 0.84x | 5 | justifies |
| Growth | 0.82x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $301.92 | 0.66x | yes | FCF base $1.9B, growth 10% (input: historical growth), terminal g 4.0%, WACC 9.1%, 6yr projection |
| DCF Exit Multiple | Growth | $241.21 | 0.82x | yes | Exit EV/EBITDA: 11.3x / 13.3x / 15.3x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $256.79 | 0.77x | yes | P/E 24x (static sector reference · 2026-04), scenarios: 20.0x / 24.0x / 28.0x (bear / base = reference held flat / bull), EV/EBITDA 16x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $112.73 | 1.76x | yes | BV/sh $44.55, ROE (TTM) 23.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $179.15 | 1.11x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $170.55 | 1.16x | yes | Rev $5.5B, growth 10% (input: historical growth; tapered), Terminal P/S: 4.4x / 5.2x / 6.1x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $177.07 | 1.12x | yes | EPS $10.37, growth 17% (input: historical EPS growth), PEG=1.12 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $85.63 | 2.32x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.38B × (1−21%) / WACC 9.1% → EPV (no growth) |
| Residual Income | Asset | $164.47 | 1.21x | yes | BV $44.55 + 5yr PV of (ROE (TTM) 23.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $101.95 | 1.95x | yes | √(22.5 × EPS $10.37 × BVPS $44.55) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $237.58 | 0.84x | yes | EBITDA $2.11B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $135.75 | 1.46x | yes | FCF $1754.2M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $128.21 | 1.55x | yes | SBC-adj FCF $1.65B (FCF $1.75B − SBC $0.10B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $334.61 | 0.59x | yes | EPS $10.37 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $34.23 | 5.80x | yes | BV $44.55 × (ROIC 7.0% / WACC 9.1%) |
| P/Sales Sector | Relative | $152.01 | 1.31x | yes | Revenue $5.54B × sector P/S 4.0x |
| PEG Fair Value | Relative | $265.60 | 0.75x | yes | EPS $10.37 × (PEG 1.5 × growth 17.1% (input: historical EPS growth)) → PE 25.6x |
| Earnings Yield | Earnings | $112.11 | 1.77x | yes | EPS $10.37 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $996.4m |
| Net debt / NOPAT (after-tax) | -0.67x (net cash) |
| Net debt / operating income (pre-tax) | -0.53x (net cash) |
| Share count CAGR (buyback) | -0.2% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- ResMed is the leader in sleep-apnea care, selling flow-generator devices and, more importantly, the masks and accessories patients replace on a recurring basis, with a growing Residential Care Software arm layered on top.
- The recurring-revenue model is the moat: masks and accessories grew 12 percent globally last quarter and the consumables base resets demand every year, which is why the price implies only modest operating growth of about 4 percent a year rather than a heroic assumption.
- Watch gross margin and the durability of device demand: non-GAAP gross margin reached 62.8 percent, up 290 basis points, but the open question that has hung over the stock is whether GLP-1 weight-loss drugs shrink the future sleep-apnea population.
Bull Case
The balance sheet tells you how confident ResMed is in its own cash generation: it carries close to $1 billion in net cash and roughly $1.66 billion in total liquidity, with a share count that is essentially flat and a quarterly dividend it just affirmed at $0.60. A company that holds net cash, pays a dividend, and does not need to dilute is one that funds its growth and its returns entirely from operations. ResMed generated $554.1 million of operating cash flow in a single quarter; this is a self-financing compounder, not a business reaching for capital.
The engine is the razor-and-blade structure of sleep care. ResMed sells the device once, then the patient replaces masks and accessories on a recurring schedule for years, which turns each new patient into an annuity. The most recent quarter showed that model working: net revenue rose 11 percent to $1.43 billion, 8 percent in constant currency, with masks and accessories up 12 percent globally. The filing attributes the device-and-mask growth to "increased demand and unit sales," the cleanest kind of growth, more patients using more product, not price increases papering over volume. On top of the hardware sits a Residential Care Software business the 10-K reports at $641.4 million in FY2025, up 10 percent, adding a higher-multiple recurring stream.
The profitability is widening even as the company grows. Non-GAAP gross margin reached 62.8 percent, up 290 basis points year over year, on manufacturing efficiencies and lower component costs, and non-GAAP earnings per share climbed to $2.86 from $2.37. ResMed competes in a market where the 10-K names rivals such as Philips and Fisher & Paykel, but its scale in masks and its installed base give it the recurring-revenue advantage those competitors chase. At a multiple that asks for only about 4 percent annual operating growth, a business compounding revenue at double digits with expanding margins and a fortress balance sheet is being priced as though its growth is about to stop, which is the gap the bull case points to.
Bear Case
The structural truth a ResMed holder has to weigh is that the company's entire franchise rests on the size of the diagnosed sleep-apnea population, and a new class of drugs is, for the first time, plausibly able to shrink it. GLP-1 weight-loss medications reduce the obesity that drives a large share of obstructive sleep apnea, and the market's recurring worry is that fewer obese patients eventually means fewer CPAP patients. ResMed's revenue is built on a long tail of mask and accessory replacement, so the threat is not to this year's numbers but to the multi-year patient inflow the recurring model depends on. The price implies only modest growth precisely because the market is unsure whether the long-run demand curve still slopes the way it always has.
Competition and reimbursement are the more immediate pressures. The 10-K lists a deep competitive set, naming "Philips BV; Fisher & Paykel Healthcare Corporation Limited; DeVilbiss Healthcare" among others, and a Philips re-entry or aggressive pricing from any of them would pressure both share and margin in a market ResMed has dominated. Reimbursement is the other lever the company does not control: the filing notes ResMed sells primarily to home-medical-equipment providers, health systems, and sleep clinics, and that reductions in third-party-payor reimbursement to those customers could weigh on demand. A device-and-consumables business is only as healthy as the reimbursement that pays for it.
The valuation methods read ResMed as supported but not cheap, and the asset-based lens is the dissent. The relative-multiple and forward-growth methods reach the price, but the book-value-and-profitability methods land above the price, meaning a buyer is paying more than the demonstrated-asset value would warrant on the strength of the growth continuing. Earnings-power value, on normalized margins, sits well below the price. The stock is not priced for disaster, but at a multiple that already credits steady growth, the GLP-1 question is the kind of slow-developing structural risk that does not show up in a quarter and then suddenly does. The bear case is that the recurring annuity is more exposed to a one-time change in the patient population than its smooth historical growth suggests.
Valuation
What the price is betting on ResMed is modest and, on the surface, reasonable. At about 14 times company-wide operating income, the price implies operating profit grows roughly 4 percent a year over five years, a pace well within what the company has recently delivered. For a market leader compounding revenue at double digits with widening margins, a 4 percent priced-in assumption looks conservative, which is the heart of why the static methods see value here.
The methods divide in ResMed's favor. The relative-multiple methods, benchmarking it near a healthcare-sector earnings multiple, and the forward-growth methods both reach the price, because they credit the durable double-digit revenue growth and 62.8 percent gross margin. Only the asset-based methods read the price as expensive, which is expected for a high-return business whose value is in its franchise and recurring base rather than on its balance sheet. The pattern, growth and relative methods supporting the price and only the asset lens dissenting, describes a quality compounder priced for continued steady growth, not a stretched momentum name.
Solvency is a clear strength and shifts the entire question to demand durability. ResMed holds close to $1 billion of net cash and about $1.66 billion of liquidity, generated $554.1 million of operating cash flow in the quarter, and keeps a flat share count while paying a $0.60 dividend. There is no leverage risk and no financing dependence. The price is underwriting that the sleep-apnea franchise keeps growing at a steady clip; the financial strength removes the downside-capital question entirely, leaving the GLP-1 and competitive-demand debate as the only thing that can move the bet, in either direction.
Catalysts
The fiscal third quarter combined double-digit growth with margin expansion. ResMed reported net revenue of $1.43 billion, up 11 percent year over year and 8 percent in constant currency, with GAAP net income of $398.7 million, GAAP diluted EPS of $2.74, and non-GAAP diluted EPS of $2.86, up from $2.37 a year earlier. Masks and accessories grew 12 percent globally, and non-GAAP gross margin improved to 62.8 percent, up 290 basis points, on manufacturing efficiencies and lower component costs.
Capital return and cash generation were both strong, with operating cash flow of $554.1 million, cash of $1.66 billion as of quarter-end, and a declared dividend of $0.60 per share. The dominant forward question remains the long-run effect of GLP-1 weight-loss drugs on the sleep-apnea patient population, the structural debate that has shadowed the stock; the company's continued double-digit device and mask growth is the running counter-evidence. The signals to track are quarterly mask resupply trends, new-patient setup volumes, and any shift in margin trajectory, the three readouts that show whether the recurring-revenue engine keeps compounding through the drug-driven uncertainty.
Peer Cohorts (Per Segment, With Filing Citations)
Sleep and Breathing Health / Residential Care Software (reported)
- INSP (Inspire Medical Systems, Inc.)
- (no filing in the citation store)
- MASI (MASIMO CORP)
- (no filing in the citation store)
- SYK (STRYKER CORP)
- (no filing in the citation store)
- GEHC (GE HEALTHCARE TECHNOLOGIES INC.)
- (no filing in the citation store)
- SOLV (SOLVENTUM CORPORATION)
- (no filing in the citation store)
- BSX (BOSTON SCIENTIFIC CORP)
- (no filing in the citation store)
- ZBH (ZIMMER BIOMET HOLDINGS, INC.)
- (no filing in the citation store)
- MMSI (MERIT MEDICAL SYSTEMS INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
RMD fiscal Q3 2026 results, April 2026 · RMD fiscal Q3 2026 results