Key Stats for ResMed Inc.
- Current Price: $195.80
- LTM Gross Margin: 62.2%
- LTM EBIT Margin: 34.8%
- LTM ROIC: 26.0%
- Fwd 2-Yr EPS CAGR: 12.3%
- Shares Outstanding: 144.24 million
- Dividend Payout Ratio: 22.4%
ResMed Inc. (NYSE: RMD) is the global leader in devices and software for sleep apnea treatment. The company makes CPAP machines, which deliver continuous air pressure to keep airways open during sleep, along with masks, accessories, and cloud-based software that helps healthcare providers manage patients remotely.
Sleep apnea affects an estimated one billion people globally, and the vast majority remain undiagnosed and untreated. ResMed has built a dominant position in this market over decades, with 62% gross margins and 35% EBIT margins that look more like a software business than a medical device company.
The stock has spent most of 2026 selling off on fears that GLP-1 weight loss drugs like Ozempic and Wegovy will shrink the addressable market for sleep apnea treatment by helping patients lose the weight that contributes to the condition. The business results have not confirmed that fear.
Now Live: Discover how much upside your favorite stocks could have using TIKR’s new Valuation Model (It’s free)>>>
A 34% Drawdown Driven by a Narrative, Not the Numbers
The drawdowns chart shows what prolonged sentiment pressure looks like compared to the sharp crashes we have seen in other stocks this year. ResMed didn’t spike and reverse.
Starting in mid-January, the stock began a slow, nearly uninterrupted decline through early June, hitting a max drawdown of 33.75% on June 2 before a partial recovery and then further selling into July. Shares currently sit about 29% off their peak.
The GLP-1 concern is real and worth taking seriously. If weight loss drugs meaningfully reduce the prevalence of obesity-related sleep apnea over time, the addressable market for CPAP therapy could contract.
ResMed’s management has consistently pushed back on this framing, pointing to clinical evidence that GLP-1 users still require CPAP therapy and that the drugs are expanding awareness of sleep disorders generally.
Q3 fiscal 2026 results supported their case: revenue grew 9% year over year to $1.285 billion, non-GAAP EPS grew 18% to $2.84, and all three business segments- devices, masks and accessories, and software- delivered growth. The market has been pricing in a deterioration that has not arrived.
See historical and forward estimates for RMD stock (It’s free!) >>>
Free Cash Flow Has More Than Doubled in Two Years
The FCF chart is the strongest counter-argument to the bear case. ResMed generated $634 million in fiscal 2021, then saw that drop to $216 million in fiscal 2022 as global chip shortages forced the company to stockpile inventory and rebuild its supply chain, before recovering to $574 million in fiscal 2023.
What happened next is notable: FCF jumped to $1.3 billion in fiscal 2024 and $1.7 billion in fiscal 2025. A company generating $1.7 billion in annual free cash flow on roughly $5 billion in revenue is running at FCF margins above 30%.
Businesses facing genuine structural decline do not typically see their cash generation accelerate at that pace.
The cash flow profile funds a disciplined capital return program. ResMed carries a net cash position rather than net debt, pays a growing dividend at a 22% payout ratio that leaves ample room for continued increases, and repurchases shares regularly.
Non-GAAP operating margin expanded in Q3 fiscal 2026 to 30.2%, demonstrating that the business is not sacrificing profitability to chase volume.
The software segment, which includes platforms used by home health and hospice providers to manage patient care, adds recurring revenue that is entirely unaffected by GLP-1 adoption.
Build your own Valuation Model to value any stock (It’s free!) >>>
What the Valuation Model Suggests
TIKR’s model targets around $283 per share in the mid case over roughly four years, implying a total return of about 45% from current levels, or around 10% annualized.
The high case approaches $503 by the extended forecast horizon, while the low case still implies positive returns at around $315.
The return is driven by EPS growth of around 9% annually in the mid case, with net income margins expanding toward 29% as the business scales. P/E contraction of about 5% per year is the main headwind in all three scenarios, reflecting the market’s ongoing skepticism.
The scenario skews meaningfully upward, and the high case at roughly 13% annualized is genuinely compelling for a business with these margin characteristics.
Should You Buy ResMed Stock?
ResMed is growing revenue, expanding margins, generating record free cash flow, and trading 29% below its peak on a fear that has not materialized in its results.
The GLP-1 risk is worth monitoring closely, but the data so far has not supported the bear case. TIKR’s model points to around 10% annualized returns in the mid case from current prices, with meaningful upside if the GLP-1 narrative fades.
See analysts’ growth forecasts and price targets for RMD stock (It’s free!) >>>
Looking for New Opportunities?
- See what stocks billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
