RMD Resmed
08/7/26
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Over the last five years, ResMed Inc. (ASX: RMD) has demonstrated strong financial resilience, generating steady annual revenue increases and maintaining high profitability and a conservative debt profile. [1, 2, 3]
5-Year Financial Overview
- Revenue: ResMed has achieved an average annual revenue growth rate of over 11.6%, with top-line figures hitting around USD $5.54 billion in 2026. [1, 2]
- Profitability: Net margins remain a standout at approximately 27.4%, with the company consistently generating strong annual net profits (in excess of USD $1.5 billion). [1, 2, 3]
- Return on Equity (ROE): The company yields a solid ROE of 23.4%, consistently outperforming the broader medical equipment industry average. [1]
Stock Performance & Valuation
- Market Position: ResMed operates as a global leader in sleep apnea and respiratory medical devices. [1, 2, 3, 4]
- Share Price: While the stock experienced periods of high volatility, the company has historically provided strong compound annual growth over the long term. [1, 2]
- Valuation Multiples: Due to recent price adjustments, RMD CDI shares have been trading at a price-to-sales multiple of roughly 4x, which is below its 5-year historical average of 8.70x. [1]
For the latest share price, live updates, and direct broker tools, you can check the ResMed Inc. (ASX: RMD) Market Page or view historical trading charts on Intelligent Investor. To dive deeper into specific yearly statements and comprehensive valuation tools, explore the financial breakdown on Simply Wall St.
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ResMed Inc. (ASX: RMD) is currently trading at a Trailing Price-to-Earnings (P/E) ratio of approximately 18.5x to 20.8x, depending on the exact daily price movement. This valuation sits roughly 45% to 50% below its 10-year historical median of 37.02. [1, 2, 3]
At current earnings (oct 2026), the ASX:RMD stock price would need to fall to approximately A$22.05 to A$23.10 to achieve a Price-to-Earnings (P/E) ratio of 15.
Because financial platforms track and structure this information slightly differently based on trailing twelve months (TTM) or the most recent fiscal year metrics, the exact calculation depends on which current earnings per share (EPS) figure is used:
- Using TTM Diluted EPS (A$1.47): The share price would need to be A$22.05. [1]
- Using Broker/Market Fundamental EPS (A$1.49): The share price would need to be A$22.35. [1]
- Using FY2026 Reported EPS (A$1.54): The share price would need to be A$23.10. [1]
How the Calculation Works
The formula to find the target stock price based on a preferred valuation multiple is:
Target Price = Target P/E Ratio x EPS
ResMed's stock price currently trades at A$31.79 with a P/E ratio sitting between 20.6x and 21.6x. For the P/E multiple to compress to 15 without a change in underlying company profits, the market price of the stock would have to decrease by roughly 27% to 30%
10-Year Historical P/E Ratio Breakdown
| Year [1, 2, 3, 4] | Approximate P/E Ratio | Valuation Context |
|---|---|---|
| 2026 (Current) | 18.5 – 20.8 | Trading near a 10-year low due to strong earnings growth outpacing the stock price. |
| 2025 | 23.7 | Lowered valuation as weight-loss drug (GLP-1) market fears subsided and fundamentals stabilized. |
| 2024 | 26.7 | Market concerns over GLP-1 impact compressed multiples despite solid earnings. |
| 2023 | 28.0 | Post-pandemic market correction and cooling tech/growth sector valuations. |
| 2022 | 36.8 | Contraction from pandemic peaks as supply chain bottlenecks eased. |
| 2021 | 42.5 (Peaked at 76.4) | Peak valuation driven by the competitor Philips recall and elevated pandemic demand. |
| 2020 | 45.2 | High growth expectations during the initial phases of the global pandemic. |
| 2019 | 39.0 | Strong, steady baseline growth in sleep apnea markets. |
| 2018 | 35.5 | Baseline trading valuation close to historical averages. |
| 2017 | 38.2 | Elevated due to one-off tax adjustments impacting reported EPS. |
| 2016 | 29.8 | Historic entry point during a period of steady global healthcare spending. |
Key Historical Takeaways
- The 10-Year Median: The long-term historical median sits firmly around 37.0. Historically, investors have been willing to pay a premium for RMD because of its defensive healthcare moat and consistent double-digit earnings growth. [1, 3]
- The Valuation Peak (2021): ResMed's P/E ratio spiked significantly to a quarterly high of 76.39 in late 2021. This was triggered by a massive product recall from its main competitor, Philips Respironics, which temporarily handed ResMed a near-monopoly on sleep apnea devices. []
- The GLP-1 Compression (2023–2024): The P/E multiple dropped heavily down toward the mid-20s due to market fears that GLP-1 weight-loss drugs (like Ozempic and Wegovy) would drastically reduce the patient pool for sleep apnea devices.
- Current Valuation (2026): According to analysis from financial platforms like GuruFocus, ResMed is now considered "Modestly Undervalued" relative to its history. The compression to ~19x is primarily because the company's actual earnings per share (EPS) have continued to grow aggressively, while the stock price valuation multiple has not returned to its historical mid-30s baseline. [1, 2, 3]
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Over the last 10 years, ResMed (ASX:RMD) has consistently maintained a Return on Invested Capital (ROIC) well above its Weighted Average Cost of Capital (WACC), typically sustaining an ROIC in the 17% to 27% range against a historical WACC median of roughly 6.3% to 8.5%. This wide and enduring positive spread highlights strong economic value creation and a durable competitive advantage. [1, 2, 3, 4]
Current Metrics and Spread
- Current ROIC: ~24.9% (trailing twelve months)
- Current WACC: ~8.5%
- Net Economic Spread: ~16.4% in excess of cost of capital, indicating high capital efficiency. []
Historical 10-Year Context
- ROIC Trend: Ranged roughly between 15% and 27% over the decade, supported by high operating margins in cloud-connected medical devices and steady post-pandemic demand recovery. [1, 2, 3, 4]
- WACC Trend: Historically lower in the earlier half of the 10-year block (averaging closer to 6% during low interest-rate environments) and drifting higher toward 8%–8.6% recently as global baseline interest rates and cost of debt/equity increased. [1]
- Value Creation: At no point in the standard 10-year lookback did WACC surpass ROIC, confirming that ResMed consistently generates robust economic profits above investor hurdle rates.
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Buffett analysis
An analysis of ResMed Inc. (ASX: RMD / NYSE: RMD) shows it stands out as an elite compounder when evaluated against Warren Buffett’s classic investment benchmarks. [1, 2]
Management’s capital execution reveals high structural profitability combined with low-risk balance sheet mechanics. [1, 2]
Historical Return on Equity (ROE) Trends
Unlike many high-ROE companies where returns are artificially inflated by a tiny equity denominator (from heavy share repurchases or accumulated losses), ResMed's equity base actually expanded from $7.34B in FY24 to $9.58B by June 2026. Its rising ROE reflects genuine, compounding net profit growth rather than balance sheet reduction. [1, 2, 3]
Capital Allocation vs. Buffett Benchmarks
Buffett assesses capital allocation by evaluating how efficiently management deploys its retained earnings and whether the business requires massive capital expenditure to grow.
| Capital Metric | Standard Buffett Benchmark | ResMed Performance (FY26) | Strategic Alignment |
|---|---|---|---|
| ROE Consistency | > 15% sustainably | 24.27% | Strong Pass. Reflects a robust competitive "moat" in sleep apnea care. |
| ROIC Profile | Highly outperforming industry cost of capital | 26.23% (vs. ~8.2% WACC) | Strong Pass. Management generates immense economic profit on deployed capital. |
| Dividend Payout | Retain capital if high-return opportunities exist | ~23% payout ratio | Aligned. ResMed prioritizes organic reinvestment over yielding cash. |
Debt Decisions & Financial Strength
Buffett's rule of thumb is to look for a Debt-to-Equity (D/E) ratio below 0.80, preferring companies that generate enough cash to self-finance their growth organically. [1]
- Exceptional De-risking: Following a temporary peak in leverage in FY23 (D/E of 0.38) used to fund inventory and growth, ResMed aggressively paid down its obligations. [1, 2, 3, 4]
The Bottom Line
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