ResMed Inc. (RMD): A Bull Case Theory

We came across a bullish thesis on ResMed Inc. on CompoundingLab’s Substack. In this article, we will summarize the bulls’ thesis on RMD. ResMed Inc.'s share was trading at $273.01 as of October 13th. RMD’s trailing and forward P/E were 29.09 and 25.91 respectively according to Yahoo Finance.

ResMed (RMD) has quietly established itself as one of the most durable medtech franchises over the past five years, yet its stock has lagged the S&P 500. This underperformance appears driven less by fundamentals and more by investors’ focus on AI and mega-cap tech, while RMD navigated supply chain costs and Philips’ slow recovery. Despite this, the company’s fundamentals remain robust. With a ten-year median ROIC of 18%, a clean balance sheet with just 14% debt-to-equity, and an earnings yield around 4%, ResMed demonstrates elite compounding ability and financial discipline.

Its moat, while narrow, is durable: physicians and payers are highly sticky, and recurring mask resupply plus SaaS data make patient churn nearly impossible. Growth has been impressive, with revenue compounding roughly 12% historically, significantly above medtech peers, and sleep therapy devices commanding a 60% market share. The total addressable market is substantial, with over two billion people globally suffering from sleep apnea, most undiagnosed, providing a long runway for expansion.

Recent easing of supply chain constraints, combined with Philips’ ongoing recall issues, has allowed ResMed to consolidate market share. Management’s guidance anticipates mid-teens revenue growth and potential margin recovery, underscoring the company’s operational resilience. At a current price of $272 versus an intrinsic valuation of approximately $290, RMD offers a modest discount for a high-quality, defensive cash-flow business benefiting from secular tailwinds. While the stock has lagged broader indices, its consistent performance, structural advantages, and growth prospects make it an attractive compounder for patient investors seeking quality at a fair price.

Previously we covered a bullish thesis on ResMed Inc. (RMD) by LongTermValue Research in April 2025, highlighting its leadership in sleep and respiratory care, SaaS patient monitoring, and market share gains from Philips. The stock has appreciated roughly 22% since coverage. The thesis still stands as structural growth remains strong. CompoundingLab shares a similar view but emphasizes ROIC, durable moat, and margin recovery potential.

ResMed Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held RMD at the end of the second quarter which was 34 in the previous quarter. While we acknowledge the potential of RMD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.