Opinions
The Monthly Gems by Allan Tong
ResMed Inc.
RMD-N
TOP PICK
Aug 04, 2025
Stock price when the opinion was issued
You might be interested:
Premium contentRMD provides cloud based digital medical devices to assist with sleep and respiratory monitoring and treatment — a steady and reliable business model. It trades at 26x earnings and supports a respectable ROE of 25%. We like that cash reserves are growing, while debt is retired and shares bought back. We recommend setting a stop-loss at $190, looking to achieve $271 — upside potential of 22%. Yield 1.0%
(Analysts’ price target is $271.71)Premium contentPremium contentRMD has been showing positive momentum recently, it is nearing in on its all-time highs, and forward margin expansion is expected to be quite positive. Analyst estimates are trending higher, its margins have been growing, and it generats strong free cash flow, which is partly used for dividends, buybacks, and growing the balance sheet. It is trading at a reasonable valuation of 25X forward earnings, and it has structural tailwinds. We would be comfortable buying the name here today for a long-term hold.
Unlock Premium - Try 5i Free
Premium content
ResMed has beaten earnings four straight quarters, and its 31.2x PE is nowhere near its 2021 high of 74.5x. However, the street projects a lower future PE of 27.69x. The most recent EPS of $8.91 was 37.09% more than the previous year. Its ROE of 25.81% ranks among the highest in medical equipment where the average is 9.66%. A bonus is that the company operates within the U.S., so is protected from tariffs. Paying a dividend of only 0.76%, ResMed is one for growth, not income.