RMD ResMed|
Wide-moat sleep-apnea duopolist priced for 6% growth; underdiagnosis supports ~7-8% even after the GLP-1 overhang.
The business
ResMed makes CPAP/APAP devices, masks, and accessories for sleep apnea, plus home ventilators and respiratory care. It earns a device sale followed by a long, high-margin stream of mask and accessory resupply sales, which are reimbursed by payers. It also sells software (AirView, myAir, Brightree/MatrixCare) that connects devices to patients and home-medical-equipment providers.
Quality gate · 93/100
Moat & management
| Moat | wide moat |
| Source | switching costs |
| Trajectory | stable |
| Management | excellent |
It is a global duopoly with Philips, and Philips' 2021 recall handed ResMed share that has largely stayed. More than 20M cloud-connected devices tie DMEs, physicians, and payer compliance workflows to its ecosystem. Resupply economics and brand trust with sleep physicians reinforce this, and scale gives it cost and R&D leadership.
Management reinvests in connected-care R&D at high returns, keeps net cash, and has a growing dividend and a modestly shrinking share count. The expensive MatrixCare/SaaS acquisitions earned only mediocre returns, but they were small relative to the core.
Owner-earnings inputs
| Owner earnings (TTM) | 1.59B |
| Owner-earnings yield | 5.0% |
| Free-cash-flow yield | 5.1% |
| Growth used (normalized) | 7.5% |
| Market-implied growth (reverse DCF) | 5.7% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 1.68B | 7.5% | 1.54B |
| 2 | 1.80B | 7.2% | 1.52B |
| 3 | 1.92B | 6.9% | 1.49B |
| 4 | 2.05B | 6.5% | 1.45B |
| 5 | 2.18B | 6.2% | 1.42B |
| 6 | 2.31B | 5.9% | 1.38B |
| 7 | 2.44B | 5.6% | 1.33B |
| 8 | 2.56B | 5.2% | 1.29B |
| 9 | 2.69B | 4.9% | 1.24B |
| 10 | 2.81B | 4.6% | 1.19B |
| 11 | 2.93B | 4.3% | 1.14B |
| 12 | 3.05B | 4.0% | 1.08B |
| 13 | 3.16B | 3.6% | 1.03B |
| 14 | 3.27B | 3.3% | 977.37M |
| 15 | 3.36B | 3.0% | 923.57M |
Key risks
- GLP-1 obesity drugs shrinking the sleep apnea population or reducing therapy starts over the long run
- Philips returning to US sleep devices and competing on price
- Reimbursement pressure (Medicare competitive bidding, payer cuts) and oral or implant alternatives such as Inspire or pharmacological OSA therapy
Catalysts
- Evidence that GLP-1 patients enter the diagnosis funnel and actually increase PAP starts
- Gross margin expansion from manufacturing efficiencies and growth in resupply and software
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Net cash 0.6B credited to value (interest stripped from owner earnings to avoid double-counting). · Price pays for ~6%/yr owner-earnings growth over 15y (reverse DCF); model credits 8%.