ResMed Inc (RMD)

Conclusion

ResMed develops and sells sleep apnoea diagnostic and therapy devices, cloud-connected patient monitoring, and software for home medical equipment and home health providers. On 2026-11-09 the share price was 235.74 USD, giving a market capitalisation of 33.2 billion USD.

The verdict is undervalued. The price-to-earnings ratio of 20.8x is well below its ten-year median of 36.4x, a premium of -42.9%, and enterprise value to EBITDA of 14.6x sits against a median of 22.2x. The discounted cash flow gives 513.30 USD per share at a discount rate of 8.9%. The fair value band runs from 347.91 to 521.86 USD with a midpoint of 434.88 USD, a margin of safety of 84.5% at the current price. The reverse DCF implies revenue growth of -0.9% a year, against a five-year revenue CAGR of 12.1% and a five-year free cash flow per share CAGR of 21.7%.

What holds the case up is the balance sheet, with net debt to EBITDA of -0.18, meaning net cash, and a return on invested capital of 28.8% against a weighted average cost of capital of 8.8%. Free cash flow conversion over the last twelve months is 178.8%. What would break it is the outlook: over the last 30 days, five analysts cut next-year estimates against four raising them, and next-year EPS growth is expected at 8.9%, well below the five-year EPS CAGR of 26.3%. The DCF also rests on a terminal value share of 59.7%, and the Beneish M-score is not available.

Financial health

Financial strength is green, held up by all four metrics assessed as good. The company holds net cash, with net debt to EBITDA of -0.18, and interest coverage of 43.8x. The current ratio is 2.65 and the quick ratio is 1.50, while debt to equity is only 0.10. The Altman Z-score is 11.9, in the safe zone. The Altman model was designed mainly for manufacturers, although ResMed is one, so the result is a reasonable guide here. Insolvency risk is low, at about 0.02% by the estimate of the Ohlson model over one to two years. The balance sheet gives no sign of stress and leaves room for the company to fund its own growth.

Earnings quality

Earnings quality is green, supported by free cash flow conversion, Piotroski and earnings surprises. Free cash flow conversion is 178.8% on a trailing twelve-month basis and 95.2% over five years. The accrual ratio is -3.3%, which means cash earnings are running ahead of reported profit. Stock-based compensation is 3.3% of revenue, and free cash flow after it is 2.66 billion USD. The five-year share count change is -0.05% a year, so buybacks slightly outpace issuance. The Piotroski score is 7 out of 9. The company beat analyst estimates in all eight of the last quarters, with an average surprise of 3.3%. The Beneish M-score is not available, so manipulation risk cannot be checked with this model.

Profitability

Profitability is green, with all four metrics assessed as good. The gross margin is 61.2% against a ten-year median of 58.1%, and the operating margin is 33.1% against 27.7%. The net margin is 27.8% against 21.1%. The operating margin stability measure is 14.8%. Return on invested capital is 28.8% against a weighted average cost of capital of 8.8%, and the given ROIC minus WACC value is 19.9%. The five-year median ROIC is 19.5%. The DuPont split shows a net margin of 26.9%, an asset turnover of 0.63 and an equity multiplier of 1.36. Leverage adds little, so the return on equity of 26.8% comes mainly from margins and capital efficiency.

Growth

Growth is green, with revenue and earnings growth both assessed as good. Revenue compound growth is 10.2% over three years, 12.1% over five years and 11.9% over ten years. Revenue grew in all ten of the last ten comparable years. Earnings per share compound growth is 19.7% over three years, 26.3% over five years and 15.4% over ten years. Free cash flow per share grew 43.9% a year over three years, 21.7% over five and 12.8% over ten. The next-year EPS estimate growth is 8.9%, a clear slowdown from the five-year pace, so the growth record is strong but the consensus expects it to moderate.

Valuation

Valuation is green, supported by the verdict, which is assessed as good with a margin of safety of 84.5%. Every current multiple is below its ten-year median: the price-to-earnings ratio is 20.8 against 36.4, a premium of -42.9%; enterprise value to EBITDA is 14.6 against 22.2, a premium of -34.1%; price to free cash flow is 11.6 against 36.3, a premium of -67.9%. The DCF gives 513.30 USD per share at a discount rate of 8.9%, with a terminal growth rate of 2.5% and a terminal value share of 59.7%. The fair value from historical multiples is 356.47 USD. The fair value band runs from 347.91 to 521.86 USD. These are estimates built on fixed assumptions, not price targets. The dividend yield is 1.87% and the payout on free cash flow is 21.7%.

Risks

The main risk is that growth slows faster than the market expects. Next-year EPS growth of 8.9% and recent downgrades of estimates point to a slowdown, and a lower growth path would reduce the value of the cash flows that the DCF depends on. The terminal value share of 59.7% means a large part of the DCF rests on assumptions far in the future, so a small change in the discount rate or terminal growth would move the result considerably. The Beneish M-score is not available, so the possibility of earnings manipulation cannot be tested with that model. The analysis has no debt maturity schedule and no revenue split by segment, so refinancing risk and the mix between sleep therapy and software cannot be judged. The fair value figures are order-of-magnitude estimates, not forecasts.