ResMed (ASX: RMD) — Investment Research Report

3-Year / 5-Year Price Scenarios

Base EPS: $1.45 — Approximate AUD-per-CDI translation of FY25 diluted EPS of US$0.951 per CDI using an AUD/USD assumption of 0.66; this is an analyst conversion, not a company forecast.

0. Information Richness & AI Limitations

Grade A (abundant). ResMed publishes detailed SEC filings, quarterly releases, product and regional disclosures, and a current results calendar. The calendar reviewed on July 31, 2026 confirms FY25 and Q3 FY26 are published; FY26 Q4 was scheduled for August 6, 2026 and is excluded. Research confidence is high on historical facts and current quote, but investment certainty is lower because long-run returns depend on competition, reimbursement, acquisitions, FX and the multiple.

1. Data & Cross-Validation

The ASX header recorded A$29.745 on July 31, 2026 and market capitalisation of A$43.632B. Dividing market cap by price gives approximately 1,467M ASX CDIs; the arithmetic reconciles by construction. Yahoo Finance was used as the independent market-data cross-check by the fresh validator; the ASX header is the recorded primary quote source. The ASX CDI represents one-tenth of a NYSE common share, so FY25 diluted EPS of US$9.51 per NYSE share is approximately US$0.951 per CDI, or about A$1.45 at the stated analyst FX assumption. That implies about 20.5x trailing earnings; FX and CDI conversion are the main cross-source caveats.

FY25 (USD, June 30, 2025): revenue US$5,146.3M, net income US$1,400.7M, diluted EPS US$9.51, GAAP gross margin 59.4%, and quarterly dividend US$0.60 per NYSE share. Q3 FY26 (USD, March 31, 2026): nine-month revenue US$4,189.8M (+10%), net income US$1,139.9M (+12%), diluted EPS US$7.79 (+12%); the quarter delivered US$1,431.4M revenue (+11%), 62.2% GAAP gross margin and US$2.74 diluted EPS. The official release and linked 10-Q agree on the figures.

2. Business Essence — Duan Yongping

One line: ResMed supplies the devices, masks, software and services that help patients manage sleep apnoea and breathing disorders at home.

The installed base creates recurring mask and accessory replacement, while connected devices and software improve adherence, clinician workflow and patient outcomes. Customers value reliable therapy and lower total care burden; providers value remote monitoring and adherence data. Pricing power is meaningful but not unlimited because payors, distributors and competing devices constrain it. Operating leverage is visible in the Q3 FY26 gross-margin expansion and the company’s ability to grow operating profit faster than revenue.

Primary sources: ResMed FY25 release (July 31, 2025) and Q3 FY26 release (April 30, 2026).

3. Moat — Buffett

ResMed’s moat is a combination of clinical trust, regulatory know-how, distribution, a large installed base, mask fit ecosystems, proprietary algorithms and a cloud-connected data network. Switching is not impossible, but patients and clinicians have friction in changing equipment, prescriptions, workflows and learned therapy routines. Scale funds R&D, manufacturing and evidence generation that smaller competitors cannot easily match.

The moat appears stable to modestly widening through AirSense/AirCurve installed-base density and software integration. Risks include Philips’ recovery, Fisher & Paykel’s competing masks and devices, low-cost entrants, open data standards and reimbursement pressure. Network effects are supportive rather than decisive: the value is primarily accumulated data and workflow integration, not a consumer social network.

4. Reverse Thinking & Risks — Munger

The inversion is straightforward: a high-quality compounder can still disappoint if growth falls from double digits to mid-single digits while investors continue paying a growth multiple. Historical medical-device analogies show that recalls, reimbursement changes and product-cycle missteps can overwhelm brand strength. Disconfirming evidence would be two or more quarters of share loss, deteriorating gross margin and falling free-cash-flow conversion.

5. Management — Duan Yongping + Buffett

CEO and chairman Mick Farrell has presided over sustained device growth, margin improvement and expansion from PAP hardware into connected care and out-of-hospital software. FY25 and Q3 FY26 show disciplined execution: revenue growth, gross-margin expansion, operating cash generation and continued dividends plus buybacks. The board’s quarterly dividend was US$0.60 per NYSE share in both cited releases.

Capital allocation is the key watch item. Acquisitions such as VirtuOx and Noctrix can broaden the platform but raise integration and return-on-invested-capital risk. Incentives should be judged by per-share earnings, cash conversion and durable clinical value rather than headline revenue alone. The installed-base moat is institutional, so it should survive a CEO transition, but product and regulatory execution remain management-sensitive.

6. Industry & Civilizational Trend — Li Lu

Sleep and breathing health sits at the intersection of ageing populations, obesity, chronic disease, home-based care and digitisation of clinical workflows. The total addressable market is constrained by diagnosis, reimbursement and patient adherence, but under-treatment leaves room for secular expansion. ResMed occupies the device-and-data layer between patients, clinicians and payors.

Long-run technology is more likely to augment than eliminate the platform: better sensors, AI-assisted coaching and remote monitoring can increase adherence and lower care costs. The main civilizational uncertainty is whether alternative therapies, prevention or new reimbursement models reduce PAP device intensity. This is a durable healthcare infrastructure business, not a limitless software market.

7. Valuation & Scenarios — Buffett + Duan

The A$29.745 quote and approximately A$1.45 translated CDI EPS imply about 20.5x trailing earnings. The scenarios use an analyst AUD conversion of US$0.951 FY25 diluted EPS per CDI at AUD/USD 0.66; they are not company guidance. Three-year: bull 10% EPS growth and 25x P/E gives A$48.25, base 7% and 22x gives A$39.08, bear 0% and 16x gives A$23.20. With probabilities 30%/50%/20%, the weighted target is A$38.65 (+30.0%). Five-year: bull 10% and 26x gives A$60.72, base 7% and 22x gives A$44.74, bear −3% and 15x gives A$18.68; the weighted target is A$44.32 (+49.0%).

The apparent upside is sensitive to the starting EPS translation, exchange rates and multiple. The bear case is a reminder that even a strong franchise can lose 37% from today’s price if growth stalls and the multiple normalises. I would require a margin of safety below the current quote rather than underwriting perpetual double-digit growth.

8. Decision Memo

Stance: Accumulate, not chase. ResMed has the best combination of installed-base economics, clinical trust, recurring consumables and software optionality in its category, and recent results support the quality thesis. The A$25–28 buy zone provides more valuation cushion. Holders can hold while revenue remains resilient, gross margin stays near the recent trajectory and acquisitions earn acceptable returns.

Add signals: a pullback without fundamental deterioration, continued double-digit reported growth, stable or rising gross margin, and stronger connected-care adoption. Sell signals: repeated share loss, reimbursement deterioration, a material gross-margin reversal, weak cash conversion or evidence that acquisitions destroy per-share value. The thesis is invalidated when the installed base no longer produces durable consumable and software economics.

Four-Master Commentary

These are analytical simulations, not real quotations.

Buffett: A trusted medical device with a large installed base and repeat consumables is a good business. I would pay a fair price, but not assume every year will deliver 10% growth.

Munger: Invert it: the money is lost through share loss, reimbursement shocks, acquisition mistakes or paying too much for a temporarily high margin.

Duan Yongping: The product ecosystem and patient workflow are valuable. Stay within the circle of competence, demand a margin of safety and measure per-share cash returns.

Li Lu: Home healthcare and connected monitoring are durable civilizational trends, but the market is still bounded by diagnosis and reimbursement. Quality does not remove valuation risk.