This comprehensive analysis, updated November 4, 2025, evaluates ResMed Inc. (RMD) through five critical lenses: Business & Moat Analysis, Financial Statement Analysis, Past Performance, Future Growth, and Fair Value. We benchmark RMD against key industry players including Koninklijke Philips N.V. (PHG), Fisher & Paykel Healthcare Corporation Limited (FPH), and Inspire Medical Systems, Inc. (INSP), distilling key takeaways through the investment framework of Warren Buffett and Charlie Munger.
The overall outlook for ResMed Inc. is positive. The company is a dominant leader in the sleep and respiratory care market. It has a highly profitable business model with strong recurring revenue from mask sales. Financially, the company is excellent, with high margins and a debt-free balance sheet. ResMed has solidified its market leadership following a major recall by its main competitor. While the stock appears fairly valued, investors should monitor competition from new weight-loss drugs. This stock is suitable for long-term investors seeking quality and stable growth.
US: NYSE
ResMed is a medical technology company focused on treating sleep-disordered breathing and respiratory insufficiency, with an added software business that supports care delivered outside the hospital. In practical terms, it sells therapy devices (like CPAP/APAP machines and certain ventilation products), the masks and accessories patients use with those devices, and a set of software platforms that help clinicians and providers manage therapy and reimbursement workflows. The company describes two operating segments—Sleep and Breathing Health and Residential Care Software—which is important for moat analysis because it signals an ecosystem strategy, not a single-product business (segment framing appears throughout its annual filings: https://investor.resmed.com/sec-filings/annual-reports). The moat question is whether ResMed’s products become part of a repeatable system that clinicians and providers prefer, or whether they can be swapped out with little friction.
On the device side, ResMed competes in a regulated, prescription-driven market where the buying process is mediated by clinicians, payers, and DMEs. That structure itself can create stickiness: providers prefer to standardize on a smaller set of device platforms so staff training, setup protocols, troubleshooting, and documentation are repeatable. If a device platform is reliable and has strong support tools, the provider’s cost to add an extra vendor is not just financial—it’s operational complexity and the risk of lower therapy adherence. In a nightly-use category like CPAP therapy, even modest increases in support burden can be felt quickly: more patient calls, more refits, more returns, and more time spent documenting compliance. Standardization decisions therefore behave like “systems” decisions, which tends to favor incumbents with strong provider relationships.
Masks and accessories are where ResMed’s business model becomes more defensible and where its moat becomes easiest to understand. A CPAP machine can last years, but the mask and related replacement items are recurring and highly personalized. Fit, seal quality, comfort, and skin tolerance can determine whether a patient continues therapy at all. That pushes clinicians and DMEs to favor mask systems with broad sizing options, reliable availability, and strong patient education—because a failed mask fit often leads to poor adherence and higher provider workload. Once a patient finds a comfortable setup and a provider has a repeatable fitting process, switching becomes a hassle: refitting takes time, and a small change in comfort can lead to therapy abandonment. This is a classic consumables attachment model: recurring items are not just “extra sales,” they are what keep the customer relationship active over time.
Connectivity is the second major moat pillar because it turns “device sales” into an ongoing management relationship. ResMed’s AirView is a cloud-based system used by clinicians and providers to view patient therapy data, identify problems early, and intervene without requiring frequent in-person visits (AirView overview: https://www.resmed.com/en-us/health-professionals/solutions/airview/). On the patient side, myAir provides engagement features and feedback that can make therapy feel less confusing and more motivating (myAir described in the FY2025 10-K: https://www.sec.gov/Archives/edgar/data/943819/000094381925000035/rmd-20250630.htm). This kind of “device + data + engagement” setup strengthens switching costs because providers often build compliance and outreach processes around data flows, while patients build habits around a familiar routine. A competitor does not only have to match device performance; they also need to match workflow convenience.
ResMed also benefits from “data flywheel” dynamics, which are common in connected medical devices. As more patients use connected devices, the company can learn which settings, mask fits, coaching prompts, and escalation pathways lead to higher adherence and fewer support issues. Over time, that can translate into better comfort features, stronger clinical decision support, and tools that reduce provider labor. ResMed emphasizes the value of its connected ecosystem and large-scale clinical respiratory data as part of enabling more personalized, efficient care (discussion in FY2025 10-K: https://www.sec.gov/Archives/edgar/data/943819/000094381925000035/rmd-20250630.htm). For moat purposes, the key is not that “data exists,” but that providers and patients can experience fewer problems and smoother therapy management, which encourages them to stay on the same platform.
The Residential Care Software segment adds a different kind of stickiness: business operations dependence. Products like Brightree (commonly used in home medical equipment and pharmacy workflows) and MatrixCare (used in long-term and post-acute care settings) sit in the middle of billing, documentation, scheduling, and care coordination. Once a provider runs its business on a platform like this, switching can be disruptive because it touches claims, reimbursement audits, staff training, and integrations with other systems. That type of switching friction is often stronger than “device switching” because it is tied to core back-office processes. Strategically, this can complement the device moat: ResMed can be present both where therapy is delivered and where the business of delivering therapy is managed.
Competition in sleep and respiratory care shows why trust and reliability are key moat components. Large rivals have faced situations where product safety issues created regulatory scrutiny and long remediation timelines. For example, Philips’ recall in sleep and respiratory devices demonstrates how quickly providers can lose confidence in a platform when quality failures occur (FDA overview: https://www.fda.gov/medical-devices/respiratory-devices/recalled-philips-ventilators-bipap-machines-and-cpap-machines). In an industry where clinicians are accountable for patient safety and outcomes, reputational trust is a moat asset. Providers generally prefer vendors that minimize risk: stable supply, consistent product performance, and clear compliance documentation. This creates an advantage for companies that execute reliably over long periods, because vendor selection decisions can become conservative and relationship-driven.
The main moat risks are the ones that can break trust or reduce switching frictions. First, any meaningful safety event, recall, or regulatory enforcement action can cause providers to pause orders, tighten vendor evaluation, or demand costly updates—directly attacking the “reliability” portion of the moat. Second, reimbursement and compliance requirements can change, and if a vendor’s monitoring and documentation tools do not keep up, providers may reconsider standardization choices. Third, the category can attract innovation that changes how patients enter therapy or which therapies are prioritized; even if ResMed remains a strong incumbent, changes that reduce device standardization or consumables attachment can weaken moat mechanics. In other words, ResMed’s moat is best understood as an ecosystem moat—devices + consumables + software + workflows—and the company’s durability depends on keeping each part of that ecosystem trustworthy and easy to use so switching remains an unattractive, multi-step decision rather than a simple price comparison.
ResMed's recent financial performance showcases a robust and highly profitable business. The company has consistently grown revenue, posting an annual increase of 9.8% to $5.15 billion and maintaining that pace in recent quarters. More importantly, this growth is profitable, with a strong gross margin around 60% and a very impressive operating margin of 32.8% for the full year. This indicates significant pricing power and disciplined control over operating expenses, allowing a large portion of sales to convert into profit.
The balance sheet is a key source of strength and resilience. As of the most recent quarter, ResMed holds more cash ($1.38 billion) than total debt ($846 million), resulting in a net cash position. Key leverage ratios are exceptionally conservative, with a Debt-to-EBITDA of 0.46x and a Debt-to-Equity ratio of just 0.14. This minimal reliance on debt provides immense financial flexibility to invest in research and development, pursue strategic acquisitions, and consistently return capital to shareholders through dividends and buybacks without financial strain.
Profitability and cash generation are standout features. Annual net income grew over 37% to $1.4 billion. The company is a formidable cash machine, converting a third of its revenue into free cash flow, totaling $1.66 billion for the fiscal year. This high free cash flow conversion easily covers all capital expenditures, debt service, and shareholder returns. The primary red flag in its financial statements is working capital management, specifically a slow inventory turnover that ties up a substantial amount of cash. However, this is currently manageable given the company's immense liquidity.
Overall, ResMed's financial foundation appears very stable and low-risk. The combination of high margins, minimal leverage, and powerful cash flow generation creates a durable financial model. While there is room for improvement in inventory efficiency, the company's core financial health is strong, providing a solid base for its operations and strategic initiatives.
An analysis of ResMed's performance over the last five fiscal years, from fiscal year 2021 through fiscal year 2025, reveals a company with a history of strong execution and financial discipline. The company has compounded its revenue at an impressive rate, growing from $3.2 billion in FY2021 to $5.1 billion in FY2025, representing a compound annual growth rate (CAGR) of approximately 12.6%. This growth was remarkably consistent, even accelerating in FY2023 (18% growth) as it captured significant market share from its main competitor, Philips, which faced a major product recall. More impressively, earnings per share (EPS) grew at a CAGR of over 30% during the same period, climbing from $3.27 to $9.55, showcasing strong operating leverage and profitability.
ResMed's profitability has been a standout feature of its historical performance. While gross margins experienced some fluctuation, staying within a range of 56.5% to 60.0%, the company demonstrated excellent cost control and operating efficiency. This is evidenced by its operating margin, which steadily expanded from 28.7% in FY2021 to a robust 32.8% in FY2025. This level of profitability is significantly higher than peers like Fisher & Paykel (~17%) and Philips, underscoring ResMed's strong competitive position and pricing power. This efficiency translated into high returns on capital, with Return on Equity consistently above 20%, reaching 25.9% in FY2025.
From a cash flow perspective, the company's performance has been strong but showed some volatility. After generating $634 million in free cash flow (FCF) in FY2021, FCF dipped significantly in FY2022 and FY2023, primarily due to investments in working capital, such as a large inventory build-up to meet demand. However, the company's cash-generating power was reaffirmed with a powerful rebound, with FCF reaching $1.3 billion in FY2024 and $1.66 billion in FY2025. This strong cash generation has allowed ResMed to consistently reward shareholders. The company has steadily increased its dividend per share from $1.59 in FY2021 to $2.12 in FY2025, all while maintaining a conservative payout ratio below 30% and actively repurchasing shares to offset dilution.
In summary, ResMed's historical record supports strong confidence in its execution and resilience. The company has navigated supply chain challenges and capitalized on competitive opportunities to deliver steady top-line growth, expanding profitability, and reliable capital returns. While stock performance has not always mirrored this operational success in the short term, the underlying financial history paints a picture of a durable and high-quality market leader in the medical instruments industry.
Over the next 3-5 years, the Hospital Care, Monitoring and Drug Delivery sub-industry should keep shifting toward care outside the hospital. In respiratory care, more stable patients are managed via homecare and DME channels, so providers will increasingly buy based on total workflow impact, not just a single device spec. The practical change is that clinicians and DMEs want fewer support calls, faster onboarding, and cleaner compliance documentation, because staffing is tight and paperwork requirements are not going away. This favors companies that can bundle reliable equipment with software that fits provider workflows.
Three forces drive demand. First, capacity and labor constraints push systems to treat more patients with the same staff, which increases interest in connected monitoring, remote troubleshooting, and automation. Second, payers and regulators push providers to document adherence and outcomes, which makes platforms that simplify data capture and reporting more valuable. Third, competitive intensity is rising because hardware features are easier to copy than full workflows: new entrants can compete on price, but it is harder to compete on distribution reach, software integration, and provider trust. As an industry anchor, it is reasonable to expect mid single-digit volume growth in home respiratory therapy over the next 3-5 years (estimate 5-7%, based on aging demographics and ongoing shift from inpatient to home pathways), with faster growth in software-driven workflow tools where providers are trying to reduce administrative labor.
Product 1: Sleep and breathing devices (CPAP/APAP and related respiratory equipment). Today, consumption is prescription and reimbursement driven, and the limiting factor is often onboarding capacity: providers must set up therapy, educate patients, and then document adherence. In the next 3-5 years, consumption should increase most in homecare providers and integrated sleep clinics that can use connected setup and remote follow-up to start more patients; it could decrease in low-touch, price-only channels if cheaper devices become "good enough"; and it will shift toward connected devices bundled with monitoring and support services. A useful proxy for scale is ResMed's FY2025 Devices revenue of 2,665.2M within Sleep and Breathing Health (FY2025 results release). Customers choose between vendors based on reliability, training burden, and workflow fit; ResMed should outperform when providers value standardization and lower support effort, while lower-cost rivals can win when procurement is mostly price-driven.
Product 2: Masks and other replacement accessories (recurring consumables). Today, this is high frequency spending because masks, cushions, and filters must be replaced and because fit problems can trigger returns and refits, which increases provider labor. In the next 3-5 years, consumption should increase most where providers can automate resupply and reduce returns; it could decrease for specific designs that add counseling steps or create safety concerns; and it will shift toward fewer mask systems that providers trust and can fit quickly. ResMed's FY2025 "Masks and other" revenue was 1,839.7M, showing this is already a large recurring pool (FY2025 results release). A key company-specific risk is that safety actions can directly disrupt demand, such as the FDA's Class I recall notice for certain ResMed CPAP masks with magnets (FDA recall notice).
Product 3: Connected monitoring and patient engagement tools (AirView and myAir). Today, consumption is daily workflow use: providers monitor adherence and intervene early, while patients get feedback that can reduce confusion and improve consistency. The constraint is adoption friction, because software only creates value if staff actually use it and if it fits existing processes. In the next 3-5 years, usage should increase most in large DMEs and health systems managing big patient panels; it could lag in smaller providers that cannot invest in workflow change; and it will shift toward more automation (data-driven setup prompts, remote troubleshooting, and less manual outreach). ResMed reports a large connected footprint of more than 30 million patients using cloud-connected devices on AirView and more than 10 million patients registered to myAir (SEC FY2025 10-K excerpt), which is a competitive advantage because it creates provider familiarity and switching friction.
Product 4: Residential care and post-acute workflow software (Brightree and MatrixCare). Today, consumption is tied to provider operations: billing, claims, audits, scheduling, and care coordination, which makes this category stickier but also slower to switch because implementation risk is real. In the next 3-5 years, demand should increase most where staffing pressure forces providers to automate and standardize; it could decrease for legacy, less-integrated tools; and it will shift toward broader platforms that cover more of the workflow end-to-end. ResMed discloses that its Residential Care Software segment is about 12% of FY2025 net revenue (FY2025 10-K PDF), which matters because it reduces reliance on pure device replacement cycles. Competition is less about a single feature and more about implementation quality and integrations; this creates opportunity for scaled vendors, but also raises the risk of churn if upgrades are painful.
An extra growth lever is new regulatory-cleared digital features that can reduce early therapy drop-off and improve comfort without adding provider labor. For example, ResMed announced FDA clearance for Smart Comfort, an AI-enabled digital medical device intended to personalize CPAP comfort settings (Smart Comfort FDA clearance press release). If features like this increase adherence, they also lift downstream consumables demand. The biggest forward risk is trust: safety events can cause providers to pause purchasing and can increase the "switching cost" of adopting new features. Overall, ResMed is positioned to grow, but success depends on delivering a reliable platform (hardware plus software) that reduces provider workload rather than adding complexity.
As of November 26, 2025, ResMed's stock price of $250.75 suggests a fair valuation when triangulating across several key methods. The company's strong fundamentals, including high margins and consistent growth, provide a solid foundation for its current market price. An analysis comparing the current price to an estimated fair value range of $244–$284 indicates the stock is fairly valued, offering a modest margin of safety and making it a solid candidate for a watchlist or incremental accumulation.
A multiples-based approach reinforces this view. ResMed's TTM P/E ratio of 25.68 is significantly below its 5-year and 10-year historical averages of around 40x, indicating the stock is cheaper than it has been historically. While reasonably valued compared to the US Medical Equipment industry average P/E of 28.2x, it trades at a discount to key competitor Fisher & Paykel Healthcare. Applying a conservative P/E multiple range of 25x-29x to its TTM EPS of $9.77 suggests a fair value range of $244 to $283.
From a cash-flow perspective, the valuation also appears reasonable. The company's TTM EV/EBITDA multiple of 18.31 is below its 5-year average of 26.5x, while its Free Cash Flow Yield of 4.91% is robust for a medical device company. Using the latest annual FCF per share of $11.28 and applying a required yield between 4.0% and 4.5%—a reasonable range for a stable, growing company—we arrive at a valuation of $251 to $282. This range aligns closely with the P/E-based valuation.
In summary, after triangulating the results from multiple methodologies, a fair value range of $248 – $285 seems appropriate. More weight is given to the cash flow and forward-looking earnings multiples, as they best reflect the company's ability to generate shareholder returns. Since the current price of $250.75 sits at the low end of this estimated range, the stock appears attractively priced relative to its intrinsic value, even if it is not deeply undervalued.
Warren Buffett would view ResMed as a quintessential 'wonderful business' operating in a field he can understand: selling a necessary product with a recurring revenue stream. The company's investment thesis for Buffett rests on its formidable economic moat, solidified by high switching costs, a trusted brand, and its rival's massive product recall which effectively handed ResMed a near-monopolistic position. He would be highly attracted to its consistent profitability, with excellent operating margins around 28% and a return on invested capital exceeding 20%, which signals a durable competitive advantage. However, the primary risk and point of hesitation for Buffett would be the valuation, as a Price-to-Earnings ratio near 30x offers little margin of safety, and he would also be cautious about the long-term threat from GLP-1 weight-loss drugs potentially shrinking the patient pool. Management uses cash prudently, prioritizing reinvestment into its high-return business while also returning capital to shareholders via a modest dividend, an approach that aligns with Buffett's philosophy of internal compounding. If forced to choose the best stocks in this sector, Buffett would pick ResMed (RMD) for its dominant moat and superior profitability, Fisher & Paykel (FPH) for its high quality and strong hospital niche, and likely a diversified high-quality leader like Becton, Dickinson (BDX) as a third choice over turnaround situations like Philips. Ultimately, Buffett would admire ResMed immensely but would likely wait on the sidelines for a more attractive price before investing. A market overreaction to the GLP-1 narrative or a broader downturn providing a 15-20% price drop would likely be the catalyst for him to buy.
Charlie Munger would view ResMed as a quintessential high-quality business, one possessing a wide and durable moat that was fortuitously expanded by its primary competitor's significant missteps. He would be drawn to the company's simple, recurring revenue model—akin to razors and blades—which is supported by powerful secular tailwinds like aging populations and the rising prevalence of sleep apnea. ResMed's superb profitability, evidenced by its ~28% operating margins and ~20% return on invested capital, demonstrates the kind of efficient, value-compounding machine he sought. The main hesitation in 2025 would be the valuation, as a Price-to-Earnings ratio around 30x is fair, not cheap, and he would also carefully consider the long-term risk from new weight-loss drugs potentially shrinking the patient pool. For retail investors, Munger's takeaway would be clear: this is a wonderful business worth owning for the long term, and any market panic over temporary headwinds should be seen as a buying opportunity. He would choose ResMed (RMD) for its dominant moat and superior returns, and Fisher & Paykel (FPH) as a high-quality peer, while avoiding speculative, unprofitable names. A sustained price drop of 15-20% would remove any valuation concerns and make this a very compelling investment for him.
In 2025, Bill Ackman would view ResMed as a quintessential high-quality, simple, and predictable business that perfectly aligns with his investment philosophy. He would be drawn to its dominant market position, which has been fortified by its primary competitor's massive product recall, creating a near-monopolistic pricing power environment. The company's business model, which pairs durable equipment with high-margin, recurring mask sales, generates substantial and predictable free cash flow, supported by best-in-class operating margins around 28% and a strong return on invested capital of ~20%. While Ackman would note the premium valuation with a P/E ratio near 30x, he would likely justify it given the company's fortress-like balance sheet (~1.0x Net Debt/EBITDA) and clear growth runway from the large, under-penetrated market for sleep apnea. The key risk to monitor would be the long-term impact of GLP-1 weight-loss drugs on ResMed's addressable market, but the immediate tailwinds from market share gains provide a strong buffer. For retail investors, Ackman’s takeaway would be that this is a top-tier company worth its premium price due to its exceptional quality and predictable compounding potential. Ackman would likely consider ResMed itself, alongside its high-quality peer Fisher & Paykel, as top investments in the space, while avoiding turnaround situations like Philips. Ackman's decision could change if a significant market correction provided a more compelling entry point with a higher free cash flow yield.
ResMed's competitive position is uniquely strong, largely due to a combination of its own solid execution and significant missteps by its primary competitor, Philips. For years, the sleep apnea device market was a duopoly between these two companies. However, Philips's multi-year recall of millions of its Respironics devices created a massive market vacuum that ResMed was perfectly positioned to fill. This event not only handed ResMed a substantial portion of Philips's market share but also bolstered its reputation for quality and reliability, which is paramount in the medical device industry. This has translated into accelerated revenue growth and solidified its relationships with durable medical equipment providers and sleep labs.
The company's business model is a key differentiator. While the initial sale of a CPAP machine is important, the real financial engine is the recurring sale of high-margin masks, tubes, and other accessories that need regular replacement. This creates a predictable and profitable revenue stream, similar to a 'razor and blades' model. This model, combined with its cloud-connected software platform (AirView) that helps monitor patient compliance, creates a sticky ecosystem that is difficult for competitors to penetrate. This software adds value for both patients and healthcare providers, increasing the barriers to switching to a rival's product.
Looking forward, ResMed's position is not without challenges. The company faces competition from Fisher & Paykel Healthcare, a well-run company with strong products, particularly in the hospital setting. Furthermore, innovative new therapies pose a long-term threat. Inspire Medical Systems, with its implantable nerve-stimulating device, offers an alternative for patients who cannot tolerate traditional CPAP therapy. While currently a niche market, its rapid growth signals a potential shift in treatment paradigms. Therefore, while ResMed is in an enviable position today, it must continue to innovate to defend its leadership against both traditional and disruptive competitors.
Overall, ResMed is currently in a significantly stronger competitive position within the respiratory care market than Philips. Philips, a massive and diversified industrial conglomerate, has seen its reputation and market share in this sector severely damaged by the vast recall of its Respironics sleep and respiratory devices. This has allowed ResMed, a more focused specialist, to capture market share, build trust with distributors and patients, and solidify its leadership. While Philips has the scale and resources for an eventual recovery, the financial and reputational costs of the recall present a multi-year headwind, leaving ResMed as the clear leader in execution, profitability, and market sentiment.
In terms of Business & Moat, ResMed's focused brand in sleep apnea, such as AirSense, is now stronger than Philips's DreamStation due to the recall. Switching costs are high for both, as patients get accustomed to a device and mask, but the trust deficit has tilted the scales heavily in ResMed's favor. ResMed's scale in the specific niche of sleep therapy is now arguably more effective than Philips's, as its supply chain has proven more resilient, capturing an estimated ~70-80% of the market post-recall. Philips has immense global scale, but its regulatory moat was breached by the recall issues, leading to an FDA consent decree that restricts its U.S. sales. Winner: ResMed, due to its enhanced brand trust and capturing of the market leadership position following its competitor's profound operational failure.
From a Financial Statement perspective, ResMed is far superior. ResMed has consistently grown its revenue, posting ~18% growth in fiscal 2023, while Philips's Connected Care segment, which includes respiratory devices, has struggled. ResMed boasts robust operating margins of around 28%, which is a key indicator of profitability, showing it keeps 28 cents of profit for every dollar of sales before interest and taxes. Philips's overall company margins are much lower, around 5-7%, and have been heavily impacted by ~€1.5B+ in litigation provisions and remediation costs. RMD’s balance sheet is healthy with a Net Debt/EBITDA ratio around 1.0x, whereas Philips's leverage is higher and its cash flow has been pressured. Winner: ResMed, by a wide margin, due to its superior growth, best-in-class profitability, and financial stability.
Reviewing Past Performance, ResMed has been the more consistent performer for shareholders. Over the last three years (2021-2024), RMD's total shareholder return has been positive, while Philips's stock (PHG) has fallen dramatically, losing over 50% of its value due to the recall crisis. ResMed's 5-year revenue CAGR has been a steady ~10-12%, while Philips's has been volatile. RMD has consistently grown its earnings and margins, whereas Philips has faced significant write-downs and earnings pressure. In terms of risk, RMD has been a lower-volatility stock, while PHG has experienced a massive drawdown and heightened risk profile. Winner: ResMed, for delivering consistent growth and strong shareholder returns while avoiding major operational disasters.
For Future Growth, ResMed has a clear, unobstructed runway. The primary driver is the continued conversion of former Philips patients and capturing the majority of new patient diagnoses, supported by a large and growing addressable market for sleep apnea. Philips's growth is entirely dependent on its ability to resolve its regulatory issues with the FDA and rebuild trust, a process that will likely take years and considerable investment. Consensus estimates project continued double-digit revenue growth for ResMed, while Philips's outlook in this segment remains highly uncertain. Edge: ResMed, as its growth path is clear and driven by market demand, whereas Philips's is a recovery story fraught with execution risk.
On Fair Value, ResMed trades at a premium valuation, often with a Price-to-Earnings (P/E) ratio in the 28-32x range. This ratio suggests investors are willing to pay a higher price for each dollar of its earnings, reflecting its high quality, strong growth, and market leadership. Philips trades at a much lower forward P/E of around 15-18x, but this reflects its significant risks, lower margins, and uncertain future. Philips may appear 'cheaper,' but it is a classic value trap—cheap for a reason. RMD’s premium valuation is justified by its superior financial profile and competitive moat. Winner: ResMed, as its higher valuation is backed by superior quality and a more predictable earnings stream, making it a better value on a risk-adjusted basis.
Winner: ResMed Inc. over Koninklijke Philips N.V. ResMed's victory is decisive, rooted in its flawless execution during a period of extreme turmoil for its main rival. Its key strengths are its best-in-class operating margins of ~28%, a pristine balance sheet with low leverage (~1.0x Net Debt/EBITDA), and a now-dominant market share in the core sleep apnea market. Philips's primary weakness is the catastrophic Respironics recall, which has led to massive financial liabilities, a shattered brand reputation, and significant operational restrictions from regulators like the FDA. The primary risk for Philips is the long and uncertain road to recovery, while ResMed's main risk is its premium valuation, which demands continued strong performance. This verdict is supported by nearly every comparative metric, from profitability and growth to investor returns and risk.
Fisher & Paykel Healthcare (F&P) is ResMed's most direct and credible competitor, representing a high-quality, focused rival in the respiratory care space. While ResMed is the undisputed leader in homecare for sleep apnea, F&P holds a stronger position in the hospital market, particularly with its Optiflow nasal high-flow therapy systems. The comparison is one of a dominant niche leader (ResMed) versus a formidable, more diversified peer (F&P). ResMed's larger scale, superior profitability, and recurring revenue model in sleep apnea give it an edge, but F&P's innovation and hospital footprint make it a worthy competitor.
Regarding Business & Moat, both companies have strong, medically-trusted brands. ResMed's AirSense CPAP machines are the gold standard in sleep, while F&P's Optiflow is a leading brand in hospital-based respiratory support. Both benefit from high switching costs and significant regulatory barriers (FDA/CE Mark approvals). ResMed's scale is larger, with annual revenues around $4.2B USD versus F&P's ~$1.7B NZD (approx. $1.0B USD). RMD's moat is deepened by its AirView software platform, creating a sticky ecosystem for patient monitoring. Winner: ResMed, due to its greater scale and the powerful recurring revenue generated by its dominant position in the larger sleep apnea market.
In a Financial Statement Analysis, ResMed demonstrates superior profitability. RMD consistently posts industry-leading gross margins around 56% and operating margins of ~28%. F&P's margins are also healthy but lower, with gross margins around 59% (a slight edge) but operating margins closer to 17%. This difference in operating margin means RMD is more efficient at converting sales into actual profit. Both companies maintain strong balance sheets with low debt; RMD’s Net Debt/EBITDA is ~1.0x and F&P's is even lower at ~0.1x. However, RMD’s Return on Invested Capital (ROIC) of ~20% is stronger than F&P’s ~15%, indicating more efficient use of capital. Winner: ResMed, as its higher operating margins and ROIC translate into superior profitability despite F&P's slightly stronger balance sheet.
Looking at Past Performance, both companies have delivered strong returns, but their trajectories have differed. F&P saw a massive surge in demand during the COVID-19 pandemic for its hospital products, leading to extraordinary growth in 2020-2021, followed by a sharp normalization. ResMed's growth has been more stable and has accelerated recently due to the Philips recall. Over a 5-year period, both have generated impressive shareholder returns, but RMD's performance has been less volatile outside of the pandemic boom-bust cycle for F&P. RMD's 5-year revenue CAGR has been a more consistent ~11%. Winner: ResMed, for its steadier, more predictable growth and performance trajectory.
For Future Growth, both companies have compelling drivers. ResMed's growth is fueled by the large, under-penetrated sleep apnea market and the market share it continues to consolidate from Philips. F&P's growth hinges on the increasing adoption of its Optiflow therapy in hospitals worldwide and new product launches. Analyst consensus forecasts suggest ResMed will grow revenue in the low double digits, while F&P is expected to return to high single-digit growth post-normalization. The edge goes to ResMed due to the clear and durable tailwind from its competitor's troubles. Winner: ResMed, as its path to near-term growth is clearer and more certain.
In terms of Fair Value, both companies trade at premium valuations, reflecting their high quality. ResMed's forward P/E ratio is typically in the 28-32x range, while F&P's is often slightly higher, around 30-35x. The choice often comes down to which premium is more justified. RMD's valuation is supported by higher margins and a more dominant market position. F&P's valuation relies on a return to strong growth in its hospital segment. Given RMD's superior profitability metrics and clearer growth outlook, its premium seems more reasonably supported. Winner: ResMed, as it offers a more compelling financial profile for a slightly less demanding valuation multiple at present.
Winner: ResMed Inc. over Fisher & Paykel Healthcare. ResMed takes the lead due to its superior scale, profitability, and dominant position in the lucrative sleep apnea market. Key strengths for ResMed include its ~28% operating margins, which are significantly higher than F&P's ~17%, and its powerful recurring revenue model from mask resupply. F&P is a high-quality competitor with a stronger hospital presence and an excellent balance sheet, but it operates at a smaller scale and with lower overall profitability. The primary risk for ResMed is defending its high valuation, while for F&P, the risk lies in re-accelerating growth to justify its own premium multiple. Ultimately, ResMed's financial strength and market leadership make it the stronger of these two excellent companies.
Inspire Medical Systems offers a fascinating contrast to ResMed, representing a disruptive innovator versus a dominant incumbent. ResMed is the king of the traditional, non-invasive CPAP therapy market, built on a highly profitable, high-volume device and consumables model. Inspire is a pioneer in an entirely different approach: a surgically implanted neurostimulation device that treats sleep apnea from the inside. This makes for a comparison of a stable, cash-gushing giant against a high-growth, yet-to-be-profitable disruptor. For most investors, ResMed's proven model and financial strength are more attractive, but Inspire's growth potential cannot be ignored.
In Business & Moat, ResMed's advantages lie in its established brand (AirSense), vast distribution network, and the sticky, recurring revenue from its ~20 million cloud-connected patients. Its regulatory moat is extensive. Inspire's moat is built on strong patent protection for its technology and the high switching costs associated with a surgical implant. However, its market is much smaller, with ~70,000 patients implanted to date, and it requires specialized physician training, limiting its scale. ResMed’s moat is broader and more established. Winner: ResMed, due to its immense scale, profitable business model, and entrenched position in the existing standard of care.
From a Financial Statement perspective, the companies are worlds apart. ResMed is a model of profitability, with operating margins around 28% and generating over $1 billion in annual free cash flow. Inspire is in a high-growth phase, with revenues growing at ~50% annually, but it is not yet consistently profitable, posting a net loss in its most recent fiscal year. This is expected for a company investing heavily in market development and R&D. ResMed's balance sheet is rock-solid, while Inspire's is healthy for a growth company but relies on maintaining investor confidence to fund its expansion. Winner: ResMed, as it is a highly profitable and self-funding enterprise, whereas Inspire is still consuming cash to grow.
Analyzing Past Performance, Inspire is the clear winner on growth, with a 3-year revenue CAGR exceeding 60%. ResMed's growth has been slower but far more stable, around 10-12%. However, from a shareholder return perspective, the picture is more volatile. Inspire's stock (INSP) has experienced huge swings, reflecting its high-growth nature and sensitivity to clinical data and reimbursement news. RMD has provided more stable, consistent returns. RMD has consistently grown earnings, while INSP has posted losses. Winner: Inspire for revenue growth; ResMed for profitability and risk-adjusted returns. Overall, ResMed wins for its proven track record of profitable execution.
Looking at Future Growth, Inspire has a potentially higher ceiling. Its primary driver is expanding market access through insurance reimbursement and convincing more patients and doctors to opt for a surgical alternative. Its addressable market within the non-compliant CPAP population is large. ResMed's growth comes from expanding the overall sleep apnea market and taking share, which is a lower-but-steadier growth profile. Analyst consensus expects Inspire to continue growing revenue at 25-30%+, significantly outpacing ResMed's ~10%. Winner: Inspire, for its substantially higher growth potential, albeit with higher associated risk.
On Fair Value, the comparison is challenging. ResMed trades on traditional metrics like a P/E ratio of ~30x. Inspire has no positive earnings, so it is valued on a Price-to-Sales (P/S) basis. Its P/S ratio can be high, often 8-12x, reflecting investor optimism about its future growth. Valuing Inspire is about betting on its potential to become the new standard of care for a segment of patients and eventually achieve high profitability. ResMed is valued on its current, proven earnings power. For a value-conscious investor, RMD is the only choice. Winner: ResMed, as its valuation is grounded in actual profits and cash flow, making it fundamentally less speculative.
Winner: ResMed Inc. over Inspire Medical Systems. ResMed is the winner for the majority of investors seeking profitable, stable growth from an established market leader. Its strengths are its exceptional profitability (~28% operating margin), massive free cash flow generation, and a defensible, recurring-revenue business model. Inspire is a high-risk, high-reward proposition; its key strength is its explosive revenue growth (~50%+) driven by a disruptive technology. Inspire's notable weaknesses are its current lack of profitability and a business model that requires complex surgery, which will inherently limit its addressable market compared to a non-invasive device. The primary risk for ResMed is long-term disruption from technologies like Inspire's, while the risk for Inspire is achieving sustained profitability and justifying its high-growth valuation. ResMed's proven, profitable model makes it the superior investment today.
Comparing ResMed to Vyaire Medical involves evaluating a public market leader against a large, privately-held specialist. Vyaire, which was spun off from Becton Dickinson (BD), has a strong legacy and a comprehensive portfolio in respiratory diagnostics, ventilation, and anesthesiology delivery. It is a formidable competitor, especially within the hospital setting. However, ResMed's focused strategy on the high-growth, high-margin home sleep apnea market, combined with its superior public financial transparency and demonstrated profitability, gives it a clear advantage for an investor's perspective.
In terms of Business & Moat, both companies have established brands and deep relationships within the healthcare system. Vyaire's strength lies in its acute care hospital footprint, with products like ventilators being critical infrastructure. ResMed's moat is in the chronic care home setting, driven by its massive network of connected devices and the recurring revenue from mask sales. While Vyaire has significant scale, its business was reportedly heavily impacted by the post-COVID drop in ventilator demand. ResMed's focus on the non-acute sleep market has provided more stable demand. ResMed's public status and ~$4.2B in revenue suggest a comparable, if not greater, scale than Vyaire. Winner: ResMed, due to its more stable, recurring revenue model and leadership in the more profitable homecare segment.
As Vyaire is a private company, a direct Financial Statement Analysis is not possible. However, based on industry dynamics and reports, we can infer some key differences. ResMed is highly profitable, with operating margins of ~28% and strong free cash flow. Vyaire, being more hospital-focused and ventilator-heavy, likely operates on thinner margins. Furthermore, reports in 2023 indicated that Vyaire was facing financial challenges and exploring options, including a potential sale, suggesting its financial health is weaker than ResMed's. ResMed's balance sheet is transparent and strong, with a low leverage ratio of ~1.0x Net Debt/EBITDA. Winner: ResMed, whose publicly disclosed financial strength and profitability are top-tier and stand in contrast to Vyaire's reported financial pressures.
For Past Performance, we can analyze business trends instead of stock returns. ResMed has a history of consistent, steady growth, which was accelerated by the Philips recall. Its performance is a testament to strong execution and market leadership. Vyaire's performance has likely been much more volatile. It experienced a massive, temporary boom in ventilator sales during the COVID-19 pandemic, followed by a significant decline as demand normalized and hospitals were overstocked. This boom-and-bust cycle is less desirable than ResMed's steady growth trajectory. Winner: ResMed, for its consistent and predictable performance in a more stable end-market.
Regarding Future Growth, ResMed's path is clear, driven by the underdiagnosed sleep apnea population and market share gains. Vyaire's growth will depend on hospital capital spending cycles and its ability to innovate in a competitive ventilation market. It faces intense competition from players like Dräger and Getinge. The homecare market that ResMed dominates is generally seen as having a more attractive long-term growth profile than the mature hospital capital equipment market. Winner: ResMed, for its exposure to a higher-growth end market with more favorable secular tailwinds like aging populations and rising obesity rates.
As Vyaire is private, a Fair Value comparison is not applicable in a public market context. However, we can assess their strategic value. ResMed's market capitalization of over $30 billion reflects its high profitability and market leadership. Vyaire was reportedly exploring a sale in 2023 with a potential valuation in the billions, but significantly less than ResMed. This implies that the market, both public and private, assigns a much higher value to ResMed's business model and financial profile. Winner: ResMed, as its business commands a superior valuation, reflecting its higher quality and better prospects.
Winner: ResMed Inc. over Vyaire Medical. ResMed is the clear winner due to its strategic focus on the more profitable homecare market, superior and transparent financial profile, and more stable growth trajectory. ResMed's key strengths are its ~28% operating margins, its recurring revenue model that insulates it from hospital capital cycles, and its undisputed market leadership. Vyaire is a significant player in the hospital respiratory space, but its weaknesses include a less profitable business mix, reported financial instability, and a lack of public transparency, which is a major risk for any investor comparison. The primary risk for ResMed is its high valuation, while Vyaire faces fundamental business risks related to market volatility and its financial structure. The publicly available evidence overwhelmingly supports ResMed's superior position.
Comparing ResMed to Masimo pits two highly innovative medical technology companies against each other, though they operate in different core markets. ResMed is the leader in sleep and respiratory care, while Masimo is a leader in non-invasive patient monitoring, famed for its Signal Extraction Technology (SET) pulse oximetry. The comparison is useful as both sell into the healthcare ecosystem and rely on technological moats. However, ResMed's more focused business model, higher profitability, and less complicated corporate structure currently make it a more straightforward investment than Masimo, which has recently diversified into consumer audio and is engaged in a proxy battle with its investors.
In Business & Moat, both companies have powerful technological moats. Masimo's SET technology is considered the gold standard in motion-tolerant pulse oximetry, creating high switching costs in hospitals where it is integrated into monitoring systems. Its moat is protected by a strong patent portfolio. ResMed's moat is built around its device ecosystem, recurring mask revenue, and its AirView software platform, which serves over 20 million patients. Masimo's recent acquisition of Sound United (maker of Bowers & Wilkins) has diluted its healthcare focus, a move that has been widely criticized by investors. Winner: ResMed, because its moat is directly tied to a cohesive and focused business strategy, unlike Masimo's recent, distracting diversification.
From a Financial Statement Analysis, ResMed is the stronger performer. RMD consistently delivers operating margins around 28%. Masimo's non-GAAP operating margins are typically lower, in the 15-18% range, and have been under pressure. ResMed's revenue growth has been more stable and predictable. Masimo's balance sheet has become more leveraged following the Sound United acquisition, with its Net Debt/EBITDA ratio rising to over 3.0x, while ResMed's remains a healthy ~1.0x. RMD's higher ROIC (~20%) also indicates more efficient capital allocation. Winner: ResMed, due to its significantly higher profitability, lower leverage, and more focused financial strategy.
Reviewing Past Performance, both companies have a history of innovation and growth. However, over the last three years (2021-2024), RMD has been a more stable investment. Masimo's stock (MASI) has been extremely volatile, falling significantly from its peaks due to concerns over the consumer audio acquisition and a contentious proxy fight. While Masimo has won major patent litigation against Apple, the benefits have not yet been fully reflected in its core business performance. RMD's revenue and earnings have grown more predictably. Winner: ResMed, for providing more stable and less dramatic shareholder returns and operational performance.
For Future Growth, both have distinct opportunities. ResMed's growth is tied to the expanding sleep apnea market. Masimo's growth drivers include expanding its 'Hospital at Home' platform and leveraging its monitoring technology in new applications, but this is clouded by the need to manage its consumer division. The ongoing corporate governance issues at Masimo create significant uncertainty around its future strategy and execution. RMD’s growth path is simpler and less encumbered by internal distractions. Winner: ResMed, for its clearer and more focused growth strategy with fewer self-inflicted uncertainties.
On Fair Value, ResMed trades at a premium P/E of ~30x, which reflects its high quality and stable growth. Masimo's valuation has become compressed due to its strategic and governance issues, with its forward P/E falling into the 20-25x range. On paper, Masimo might look cheaper. However, the discount is a direct result of the higher risk associated with its consumer strategy and board conflicts. An investment in Masimo today is partly a bet on a successful strategic turnaround or breakup. RMD, while more expensive, offers a much higher degree of certainty. Winner: ResMed, as its premium valuation is justified by its superior fundamentals and lower strategic risk.
Winner: ResMed Inc. over Masimo Corporation. ResMed is the winner due to its focused strategy, superior financial metrics, and stable corporate governance. The key strengths for ResMed are its best-in-class operating margins (~28%), a clear and predictable recurring revenue model, and a cohesive business strategy. Masimo is a technology powerhouse, but its notable weaknesses are its controversial diversification into consumer audio, lower profitability, higher leverage (>3.0x Net Debt/EBITDA), and significant corporate governance turmoil. The primary risk for ResMed is its premium valuation, while the risks for Masimo are strategic, financial, and operational, stemming directly from its recent corporate decisions. ResMed is a much cleaner execution story and a more reliable investment.
Based on industry classification and performance score:
ResMed’s moat is strongest where it combines therapy devices, high-frequency replacement accessories, and cloud software that keeps clinicians and home-care providers engaged throughout a patient’s treatment journey. That ecosystem makes switching harder because providers standardize workflows, patients build habits around a specific mask setup, and monitoring tools are tied into compliance and reimbursement processes. The company’s out-of-hospital SaaS products deepen those relationships by embedding ResMed into provider back-office operations, not just the bedside. The biggest moat risks come from product-safety/regulatory events and any changes that reduce workflow lock-in. Overall takeaway: positive, with some execution/quality risks to watch.
A large connected monitoring ecosystem creates meaningful switching friction for providers and supports ongoing engagement after the initial sale.
ResMed’s moat benefits from scale in connected therapy monitoring: in its FY2025 annual report it states it leverages an installed base of more than 30 million patients using cloud-connected devices on AirView and over 10 million patients registered to its myAir platform (FY2025 10-K excerpt: https://www.sec.gov/Archives/edgar/data/943819/000094381925000035/rmd-20250630.htm). From a provider perspective, a monitoring platform becomes part of the clinical workflow—used for adherence checks, proactive outreach, and documentation—so changing vendors can mean retraining staff and adjusting processes, not just swapping hardware. For patients, the “habit loop” of a specific device-mask setup plus app feedback can reduce willingness to change systems unless there is a clear clinical reason. This installed-base dynamic is a classic service lock-in pattern in medtech: the product becomes embedded in routines, data, and support pathways, which helps protect share even when competitors offer similar device features.
ResMed is deeply positioned in home and post-acute care through both its device distribution and its provider SaaS footprint.
ResMed’s business extends beyond selling devices into hospitals: it operates a dedicated Residential Care Software segment and discloses that this segment represents about 12% of net revenue in FY2025 (FY2025 10-K: https://investor.resmed.com/sec-filings/all-sec-filings/content/0000943819-25-000035/0000943819-25-000035.pdf). That matters because home-care providers (DMEs, home health/hospice, senior living) are a key channel for sleep and respiratory therapy, and software creates daily operational touchpoints. ResMed has also stated that Brightree, its post-acute care software business, serves more than 2,500 organizations across HME/home health/hospice and related segments (ResMed/Brightree press release: https://investor.resmed.com/news-events/press-releases/detail/208/its-a-new-day-for-hme-business-efficiency). In addition, MatrixCare (acquired by ResMed) was described as being used in more than 13,000 facility-based care settings and 2,500 home care, home health and hospice organizations (OMERS release: https://www.omers.com/news/omers-private-equity-announces-agreement-to-sell-matrixcare-to-resmed). This combination suggests broad channel reach and relationships that go beyond product shipments—supporting durable demand capture in out-of-hospital care.
While ResMed is not primarily an injectables supplier, its recent margin improvement suggests stronger procurement and manufacturing execution versus the prior year.
Public “on-time delivery/backorder” metrics are not typically disclosed, so a practical proxy for supply chain execution is whether a company can consistently fulfill demand while improving cost-to-serve. ResMed’s FY2025 results highlight gross margin improvement to 60.8%, which it attributed mainly to procurement, manufacturing and logistics efficiencies (FY2025 8-K / earnings materials: https://investor.resmed.com/sec-filings/all-sec-filings/content/0001193125-25-170512/0001193125-25-170512.pdf). Compared with a respiratory-focused peer like Fisher & Paykel Healthcare, which reported a 62.9% gross margin for its 2025 financial year (FPH release: https://www.fphcare.com/en-ca/corporate/news/record-full-year-revenue-result-for-fisher-paykel-healthcare/), ResMed’s gross margin is modestly lower (~2.1 percentage points), which is roughly a ~3% gap and therefore broadly “in line” rather than a red flag. Against large diversified medtech peers, gross margins can be higher (e.g., Medtronic lists ~65.5% gross margin TTM: https://investorrelations.medtronic.com/key-ratios), so ResMed still has room to improve, but the direction and attribution suggest improving operational reliability. Given limited injectables relevance and limited direct fulfillment metrics, the evidence supports a cautious pass rather than an enthusiastic one.
ResMed has a sizable recurring accessories business (masks and related items) that reinforces customer stickiness beyond the initial device sale.
ResMed’s accessories (masks, cushions, headgear, filters, and other replacement items) create a recurring revenue stream that reinforces the device ecosystem. In FY2025, ResMed reported global revenue of $2,665.2M from Devices and $1,839.7M from “Masks and other” within its Sleep and Breathing Health portfolio (FY2025 earnings release: https://investor.resmed.com/news-events/press-releases/detail/405/resmed-inc-announces-results-for-the-fourth-quarter-of-fiscal-year-2025). That implies “Masks and other” is roughly 40.8% of the Sleep and Breathing Health segment—material recurring volume for a medtech company. For DMEs and clinics, a stable mask fit reduces support calls, returns, and patient drop-off, so providers have incentives to standardize on a mask ecosystem that performs well. Over time this drives repeat purchasing behavior and makes competing offerings feel riskier, because a small decline in comfort or fit can cause therapy abandonment and extra provider workload. This recurring attachment is a tangible moat feature: it is harder for a competitor to win share if they must displace both the device platform and the patient’s established mask setup.
ResMed operates in high regulatory standards and shows ongoing innovation, but safety events can still meaningfully damage trust.
Regulatory execution and quality systems are central to moat in respiratory devices because clinicians and providers prioritize safety and reliability. ResMed has continued to obtain regulatory clearances for new digital/AI features—for example, it announced FDA clearance for its “Smart Comfort” AI-enabled settings intended to personalize CPAP comfort (ResMed release dated Dec 8, 2025: https://investor.resmed.com/news-events/press-releases/detail/413/resmed-receives-fda-clearance-for-personalized-therapy-comfort-settings-to-be-marketed-as-smart-comfort-an-ai-enabled-digital-medical-device-that-helps-personalize-cpap-therapy). However, ResMed has also faced significant safety-related actions; the FDA identified a Class I recall for certain ResMed CPAP masks with magnets due to possible magnetic interference with implanted medical devices (FDA recall notice: https://www.fda.gov/medical-devices/medical-device-recalls-and-early-alerts/resmed-ltd-recalls-continuous-positive-airway-pressure-cpap-masks-magnets-due-possible-magnetic). While recalls can occur even in well-run medtech companies, Class I actions raise the bar for corrective communication and can temporarily weaken provider confidence. Overall, ResMed appears to have the regulatory capability to innovate, but the moat here depends on maintaining a strong safety track record going forward.
ResMed's financial statements reveal a very healthy and stable company. It demonstrates strong revenue growth around 10%, impressive operating margins consistently above 32%, and exceptionally strong free cash flow generation, with an annual FCF margin of 32.3%. While the company operates with very low debt and a large cash balance, its slow inventory turnover is a notable weakness that ties up significant cash. The overall investor takeaway is positive, as the company's high profitability and fortress balance sheet provide a solid foundation, though efficiency in inventory management needs improvement.
Although specific data is not provided, ResMed's business model is fundamentally built on a stable and profitable mix of one-time device sales and recurring revenue from essential supplies.
The provided financial statements do not break down revenue into recurring (consumables, software) versus capital (devices) streams. However, ResMed's business model is well-known for its powerful 'razor-and-blades' approach. The company sells durable medical equipment like CPAP machines (the 'razor'), which creates a long-term stream of high-margin, recurring revenue from the necessary and frequent replacement of masks, cushions, and tubing (the 'blades'). This is a significant strength for investors.
This mix creates a stable and predictable revenue base that is less susceptible to economic cycles than a business based purely on capital equipment sales. The consumables portion of the business typically carries higher gross margins, contributing disproportionately to overall profitability. While we cannot quantify the exact mix from the available data, the company's consistently high gross margins and stable growth are strong evidence of the success of this model. This recurring revenue stream is a key reason for the company's financial stability and attractiveness.
ResMed consistently delivers excellent profitability, with strong gross margins and best-in-class operating margins that are well above industry averages.
ResMed's profitability is a core strength, reflecting strong pricing power and effective cost management. The company's gross margin has remained robust, registering 60.0% for the fiscal year and improving to 62.0% in the most recent quarter. These high margins indicate the company can effectively manage its production costs and command premium prices for its products. Even more impressive is the operating margin, which stood at 32.8% for the year and 34.6% in the latest quarter. This is a very strong result, likely placing it in the top tier of its peers and showing excellent control over selling, general, and administrative (SG&A) and R&D expenses.
For the full year, R&D expenses were 6.4% of sales, while SG&A expenses were 19.3%. These figures represent a healthy and necessary investment in innovation and commercial infrastructure, yet they do not compromise overall profitability. The ability to maintain an operating margin above 30% while continuing to invest for the future is a clear indicator of a high-quality, efficient business model.
ResMed demonstrates exceptional capital efficiency, spending a very small percentage of sales on capital expenditures while generating high revenue from its existing asset base.
ResMed's capital spending appears disciplined and highly efficient. For the full fiscal year, the company's capital expenditures were just $89.9 million on over $5.1 billion in revenue, translating to a capex-to-sales ratio of only 1.75%. This is quite low for a manufacturing-based company and suggests an effective, possibly asset-light, production model. This efficiency is further confirmed by its Property, Plant & Equipment (PPE) turnover ratio. With TTM revenue of $5.26 billion and PPE of $725.6 million, the PPE turnover is a high 7.25x, indicating that the company generates substantial revenue for every dollar invested in fixed assets.
While this low spending is far more efficient than many industry peers who might spend 3-6% of sales on capex, it could pose a risk if demand surges beyond current capacity. However, given the company's steady ~10% revenue growth, the current level of investment appears well-aligned with demand, prioritizing efficiency over aggressive expansion. This approach maximizes free cash flow and returns on invested capital.
ResMed's working capital management is a notable weakness, with a very slow inventory turnover that ties up significant cash and creates potential risk.
While ResMed excels in many financial areas, its working capital efficiency is a clear concern. The primary issue is with inventory management. The company's annual inventory turnover ratio is a low 2.09x. This means, on average, inventory is held for a very long period of approximately 175 days before being sold. This is significantly slower than what would be considered efficient and results in nearly $1 billion of cash being tied up in inventory. Such high inventory levels increase the risk of obsolescence, spoilage, or the need for write-downs, especially in a technology-driven medical field.
On a more positive note, the management of accounts receivable appears reasonable. Days Sales Outstanding (DSO) can be calculated at around 70 days, which is acceptable for a business selling into the healthcare system. However, the drag from the slow-moving inventory leads to a very long overall cash conversion cycle of roughly 196 days. For investors, this inefficiency represents a significant use of cash that could otherwise be deployed for R&D, acquisitions, or shareholder returns. It is the most significant blemish on an otherwise strong financial profile.
The company maintains a fortress balance sheet with a net cash position, extremely low leverage, and robust liquidity, providing significant financial flexibility and safety.
ResMed's balance sheet is exceptionally strong and presents a very low-risk profile. As of the latest quarter, the company holds $1.38 billion in cash and equivalents, which exceeds its total debt of $846 million, resulting in a net cash position of $537.5 million. This is a clear sign of financial strength. Key leverage metrics are very conservative; the annual Debt-to-EBITDA ratio is 0.46x, significantly below industry norms which can be 2.0x or higher. Similarly, the Debt-to-Equity ratio is a mere 0.14, indicating that the company is overwhelmingly financed by equity rather than debt.
Liquidity is also robust, with a current ratio of 2.89 in the latest quarter, meaning current assets cover current liabilities almost three times over. This strong financial position is supported by massive free cash flow generation ($1.66 billion annually), which can easily service its minimal debt obligations and fund all business needs. For investors, this translates to very low financial risk and the ability for the company to weather economic downturns, invest in innovation, and return cash to shareholders without financial stress.
Over the past five years, ResMed has demonstrated a strong and consistent track record of profitable growth. The company successfully grew revenue from $3.2 billion to $5.1 billion and more than doubled its earnings per share, capitalizing on market leadership and competitor missteps. Key strengths include expanding operating margins, which reached nearly 33% in fiscal 2025, and robust, albeit recently volatile, cash flow generation. While the underlying business performance has been excellent, recent total shareholder returns have been flat, suggesting the stock price has not kept pace with operational success. The overall investor takeaway on its past performance is positive, reflecting a resilient and well-managed company.
ResMed has successfully expanded its operating margin over the last five years, showcasing strong cost control and pricing power that sets it apart from competitors.
ResMed's profitability trend is a key indicator of its historical strength. While its gross margin showed some variability, fluctuating between 56.5% and 60.0% due to product mix and input costs, its operating margin has shown a clear and impressive upward trend. The company expanded its operating margin from 28.7% in FY2021 to 32.8% in FY2025. This improvement of over 400 basis points over the period highlights management's ability to control operating expenses, such as SG&A and R&D, relative to sales growth.
This performance is particularly strong when compared to peers. For example, Fisher & Paykel operates with a much lower operating margin of around 17%, and Philips's profitability has been severely damaged by its recall crisis. ResMed's ability to defend and expand its margins in a challenging environment demonstrates a resilient business model with a strong competitive moat.
While free cash flow was volatile in fiscal 2022 and 2023 due to working capital investments, it has since recovered to record levels, confirming the company's powerful cash-generating capabilities.
ResMed's ability to generate cash is a core strength, though its history shows some lumpiness. Free cash flow (FCF) was strong at $634 million in FY2021 before dipping to $216 million in FY2022. This dip was not due to poor profitability but a significant investment in inventory (-$311.7 million cash impact) to ensure product availability amid supply chain disruptions and high demand. The company's cash generation then staged a powerful recovery, with FCF surging to $1.3 billion in FY2024 and a record $1.66 billion in FY2025. The FCF margin in FY2025 reached an exceptional 32.3%. This rebound demonstrates that the earlier dip was a temporary strategic decision rather than a fundamental weakness, confirming the business model's high cash-conversion potential.
The company has an excellent track record of compounding revenue and earnings at double-digit rates, driven by both market growth and significant market share gains.
ResMed's past performance is defined by consistent and robust growth. Over the four-year period from FY2021 to FY2025, revenue grew at a compound annual growth rate (CAGR) of 12.6%, increasing from $3.2 billion to $5.1 billion. This growth was positive in every single year, highlighting the steady demand for its products and its successful execution, which included capturing a significant portion of the market from competitor Philips.
Even more impressively, earnings per share (EPS) compounded at a much faster rate of approximately 30.7% annually over the same period, growing from $3.27 to $9.55. This demonstrates strong operating leverage, meaning that profits grew faster than sales. This consistent, high-quality growth in both the top and bottom lines is a hallmark of a well-run company with a strong market position.
Despite excellent fundamental business performance, the stock's total shareholder returns have been nearly flat in recent years, indicating a disconnect between company operations and stock market performance.
From a risk perspective, ResMed's stock has historically been less volatile than the broader market, as indicated by its beta of 0.87. This suggests a degree of defensiveness. The company's business has been far more stable than competitors like Philips, which saw its stock collapse, and Inspire Medical, which has experienced high volatility typical of a high-growth disruptor. However, strong business results have not translated into strong stock returns recently. According to the provided ratio data, the total shareholder return (TSR) was minimal in FY2023 (0.54%), FY2024 (0.95%), and FY2025 (0.97%). This prolonged period of stagnation is a significant weakness for investors focused on capital appreciation. While the business has been firing on all cylinders, shareholders have not been rewarded accordingly in recent years, creating a frustrating performance profile.
ResMed has maintained a disciplined and shareholder-friendly capital allocation strategy, consistently growing its dividend and using buybacks to keep its share count stable.
Over the past five fiscal years, ResMed has demonstrated a balanced approach to capital allocation. The company has reliably increased its dividend per share each year, growing it from $1.59 in FY2021 to $2.12 in FY2025. This growth is supported by a healthy and conservative payout ratio, which stood at a low 22.2% in FY2025, indicating that the dividend is well-covered by earnings and has ample room for future increases.
In addition to dividends, ResMed has used share repurchases to return capital and manage dilution from employee stock programs. For instance, in FY2025, the company spent $318 million on buybacks. This has been effective in keeping the outstanding share count remarkably stable, with annual changes typically less than 0.5%. This contrasts with companies that dilute shareholders over time and shows management's focus on creating per-share value for its existing investors.
ResMed's 3-5 year growth outlook is positive because more respiratory care is moving into home settings, and the company sells both therapy equipment and the software tools that support follow-up and reimbursement workflows. Compared with device-only rivals, ResMed is better positioned to benefit when providers prioritize lower labor per patient through connected monitoring and automated resupply. The main tailwinds are rising out-of-hospital care and more demand for workflow automation, while the main headwinds are pricing pressure in devices and the possibility of safety or regulatory events that can slow adoption. Competition remains tough against large medtech platforms (for example, Philips in respiratory care and diversified peers like Medtronic), and smaller entrants can undercut on price in parts of the market. Investor takeaway: positive, but execution and product trust will decide whether ResMed captures above-market growth.
ResMed likely has durable demand, but it is hard to rate order momentum strongly because backlog and book-to-bill data are not disclosed in the provided materials.
This factor is about near-term demand visibility and whether the company has confirmed orders that support future revenue. In the information provided here, ResMed does not disclose backlog dollars, backlog growth, or book-to-bill for its equipment business, so investors cannot easily separate true end-demand growth from channel inventory swings. That matters because homecare and DME channels can adjust inventory quickly, which can temporarily inflate or suppress reported sales even if patient demand is steady. ResMed likely benefits from recurring demand characteristics, but without basic order and backlog disclosures this category is hard to score confidently. Because the scoring is supposed to be conservative and based on evidence, this factor is a Fail.
ResMed is still producing meaningful regulatory-cleared launches, which supports growth if new features reduce therapy friction and improve adherence.
Regulatory approvals and launches matter because they refresh the product cycle and can reduce friction that limits adoption. ResMed announced FDA clearance for Smart Comfort, an AI-enabled digital medical device intended to personalize CPAP comfort settings (Smart Comfort FDA clearance press release). If features like this reduce early therapy discomfort, they can improve adherence and indirectly lift longer-term consumables demand. The risk is execution: approvals only matter if the feature is actually adopted by providers and patients, and the company must avoid quality issues that can cause purchasing pauses. Given the evidence of ongoing clearance activity and the strategic fit with ResMed's connected workflow, this factor is a conservative Pass.
ResMed's channel reach looks strong because its software sits inside homecare and post-acute workflows, which expands where and how it can capture demand.
Future growth depends heavily on channel reach: the homecare and post-acute providers that onboard patients, handle resupply, and run claims are the gatekeepers for volume. ResMed has tangible reach through its software products. It states Brightree serves more than 2,500 organizations across HME, home health, hospice, and related segments (Brightree press release). MatrixCare (acquired by ResMed) was described as being used in more than 13,000 facility-based care settings and 2,500 home care, home health and hospice organizations (OMERS MatrixCare release). That footprint supports expansion by making ResMed present where patients are started, billed, and managed, not just where devices are sold. The risk is that software channel reach does not automatically translate into higher device share, but it meaningfully increases ResMed's distribution leverage, so this factor is a Pass.
Connected monitoring is a real growth advantage for ResMed because it reduces provider labor and makes adherence tracking easier, which supports higher patient starts and resupply.
In respiratory care, digital support is a capacity tool: DMEs and clinics need to manage more patients without adding staff, so remote monitoring, adherence dashboards, and automated outreach matter. ResMed discloses broad adoption of its connected platforms in its FY2025 filing, which is important because workflow adoption is harder to replicate than a hardware feature (SEC FY2025 10-K excerpt). This supports future growth through higher therapy persistence (fewer drop-offs) and potentially higher consumables pull-through when resupply is tied to data-driven follow-up. The main risk is that providers can resist workflow change if onboarding or integrations are painful, but ResMed's existing scale and embedded use make it more likely to sustain and extend this advantage than a new entrant.
ResMed shows improving operational execution, but investors have to rely on financial proxies because direct capacity and lead-time metrics are not disclosed.
ResMed does not publish clear metrics like added capacity units, service depot count, or average lead time, so a practical proxy is whether it can scale while improving cost-to-serve. In FY2025, the company reported gross margin of 60.8% and attributed improvement mainly to procurement, manufacturing, and logistics efficiencies (ResMed FY2025 8-K). That is slightly below a focused peer like Fisher & Paykel Healthcare at 62.9% gross margin for its 2025 financial year (FPH FY2025 release) and below diversified medtech benchmarks that can run higher gross margins (for example, Medtronic lists about 65.5% gross margin TTM (Medtronic key ratios)). The gap suggests ResMed still has room to improve network scale and cost efficiency, but the direction is improving and the business is already operating at a healthy margin level, so this factor earns a conservative Pass.
Based on its current stock price, ResMed appears to be fairly valued with a positive outlook. The company's P/E ratios are trading below its own historical averages, suggesting a potential discount, while its strong free cash flow yield provides a solid valuation floor. However, the stock is not a deep bargain, as its revenue multiples are elevated and it trades in the middle of its 52-week range. For investors, this presents a neutral to positive takeaway; the price reflects solid fundamentals without being overly expensive.
The stock's current P/E multiples are trading at a significant discount to their own historical averages and are reasonably aligned with industry peers, suggesting a favorable entry point.
ResMed's earnings multiples present a compelling case for fair value. The TTM P/E ratio of 25.68 and the forward P/E ratio of 22.41 are both substantially below the company's 10-year historical average P/E of over 38x. This suggests investors are paying less for each dollar of earnings than they have in the past. When compared to the Medical Equipment industry average P/E of 28.2x, ResMed is valued attractively, especially given its consistent growth. While some specialized peers in the sleep apnea space have higher multiples, ResMed's current valuation strikes a balance between its established market leadership and future growth prospects. The forward-looking PEG ratio of 1.67 indicates that its earnings growth is reasonably priced.
While justified by high margins, the stock's enterprise value-to-sales multiple is elevated, suggesting the market is already pricing in significant future growth and profitability.
The EV/Sales ratio is a useful metric for ResMed due to its business model, which involves recurring revenue from masks and consumables. Currently, its TTM EV/Sales ratio stands at 6.75. While the company's high gross margins (62.04%) and solid revenue growth (9.07%) support a higher multiple, this level is still quite rich. It indicates that investors are paying a premium for its sales, expecting continued high profitability and growth. In a market where valuations might compress, a high EV/Sales ratio could pose a risk. While the business model is strong, the valuation on a revenue basis appears full, warranting a more cautious stance on this specific factor.
The company maintains a disciplined and sustainable shareholder return policy, with a growing dividend that is well-covered by free cash flow.
ResMed's approach to shareholder returns is both prudent and shareholder-friendly. The company offers a dividend yield of 0.96%, which is supported by a very low payout ratio of only 23.13%. This low ratio means the dividend is extremely safe and has significant room to grow in the future, as demonstrated by its 11.88% one-year dividend growth rate. The company also engages in share repurchases, with a modest 0.28% buyback yield. Most importantly, the dividend is well-funded by durable cash flows, ensuring its sustainability without compromising the company's ability to reinvest in growth. This balanced policy enhances total shareholder return and supports the stock's fair value.
The company's strong balance sheet, characterized by a net cash position and high returns on capital, provides excellent support for its current valuation.
ResMed exhibits a healthy balance sheet that justifies a premium valuation. As of the most recent quarter, the company holds Net Cash of $537.5 million, meaning it has more cash than total debt ($1384 million in cash vs. $846.35 million in debt). This eliminates credit risk and provides flexibility for investment and shareholder returns. Furthermore, the company's profitability is top-tier, with a Return on Equity (ROE) of 23.06% and a Return on Capital (ROCE) of 25%. These figures indicate that management is highly effective at generating profits from its asset base, a key driver for sustainable value creation. The Price-to-Book (P/B) ratio of 5.89 may seem high, but it is well-supported by the company's superior profitability metrics when compared to less efficient peers.
Strong free cash flow generation and a reasonable enterprise valuation compared to cash earnings signal an efficient and attractively priced business.
ResMed's valuation is strongly supported by its cash flow metrics. The company boasts a Free Cash Flow (FCF) Yield of 4.91%, which is a healthy return for investors at the current price. Its enterprise value is valued at a TTM EV/EBITDA multiple of 18.31. This is lower than its 5-year average, suggesting the valuation has become more attractive. The high EBITDA margin of 37.71% in the last quarter demonstrates impressive operational efficiency, converting a large portion of revenue into cash earnings. With more cash than debt, the Net Debt/EBITDA ratio is negative, further highlighting the company's financial strength. This combination of high cash generation and a disciplined valuation makes it a pass.
The most significant structural risk facing ResMed is the widespread adoption of GLP-1 agonist drugs, such as Ozempic and Wegovy, for weight loss. Since obesity is a primary cause of obstructive sleep apnea (OSA), the potential for these drugs to reduce the severity of or even cure the condition threatens to shrink ResMed's total addressable market. While the company maintains that patient adherence to these expensive, injectable drugs may be low and that many patients will still require CPAP therapy, investors cannot ignore the risk that a growing portion of its potential customer base may no longer need its core products in the coming years. This represents a fundamental, long-term challenge to the company's growth trajectory.
Beyond the pharmaceutical threat, ResMed faces significant competitive pressure. The company benefited immensely from the massive product recall that sidelined its primary competitor, Philips, allowing it to capture a dominant market share. However, this tailwind is temporary. A critical future risk is Philips' eventual and likely aggressive re-entry into the market. This could spark a price war or intense marketing battles to reclaim lost customers, potentially eroding the high profit margins ResMed currently enjoys. Additionally, the medical device industry is ripe for innovation, and the company must constantly invest in research and development to fend off smaller, nimble competitors who could introduce more effective, comfortable, or data-driven sleep therapy solutions.
Finally, ResMed's business model is heavily dependent on favorable reimbursement policies and a stable macroeconomic environment. A substantial portion of its revenue comes from payments by government programs like Medicare and private insurers. Any adverse changes to coverage rules or reductions in reimbursement rates for CPAP machines, masks, and supplies would directly impact revenues and profitability. Moreover, while healthcare is generally defensive, a severe economic downturn could increase unemployment and the number of uninsured individuals. This would likely cause potential patients to delay diagnosis and treatment for sleep apnea, slowing the flow of new customers and restraining sales growth.
Click a section to jump