Slide Deck

1. Executive Summary: The Quality Trap

ResMed Inc. (RMD) presents one of the most complex investment paradoxes in the current medical technology landscape. On the surface, the company appears to be a quintessential “compounder”—a business with a dominant market share (exceeding 80% in key regions), a wide competitive moat forged by a digital ecosystem of 29 million connected devices ¹, and a financial profile characterized by expanding gross margins (61.5% in Q1 FY2026) ² and robust free cash flow generation ($1.7 billion LTM).³ The stock’s performance has been buoyed by a “super-normal” period of profitability, catalyzed by the catastrophic market withdrawal of its primary competitor, Philips Respironics, and the subsequent pricing power ResMed has exercised in a supply-constrained environment.

However, a rigorous, evidence-based dissection of the company’s fundamentals reveals that ResMed exhibits the classic characteristics of a “Quality Trap”—a high-quality asset priced for perfection while facing a convergence of structural risks that threaten to compress its terminal value. The market currently prices RMD at a premium multiple (approximately 26x forward earnings) ⁴, implying a continuation of double-digit growth and margin expansion. This valuation fails to adequately discount three critical, looming headwinds:

1. The GLP-1 Disruption: While management characterizes the rise of GLP-1 receptor agonists as a “tailwind” for diagnosis, actuarial modeling and clinical data from the SURMOUNT-OSA trial suggest a high probability of long-term acuity reduction in the patient population. If obesity—the primary mechanical cause of Obstructive Sleep Apnea (OSA)—is treated pharmacologically, the “churn rate” of CPAP therapy is likely to accelerate, eroding the high-margin resupply annuity that underpins ResMed’s valuation.⁵
2. The Philips Re-entry: The competitive vacuum created by the Philips consent decree is temporary. With remediation nearly 99% complete ⁷, Philips is poised for a U.S. market re-entry in the 2025-2026 timeframe. The inevitable strategy for a returning incumbent with damaged goodwill is aggressive price disruption, which will likely force ResMed to cede gross margin points to defend market share.⁸
3. Capital Allocation Inefficiency: Management’s pivot to “out-of-hospital” SaaS (Software as a Service) via acquisitions like MatrixCare and Brightree has diluted Return on Invested Capital (ROIC). These assets were acquired at high multiples but have delivered organic growth rates (mid-single digits) that lag the core business, suggesting a “diworsification” strategy rather than genuine synergy.⁹

This report provides an exhaustive analysis of these factors, utilizing forensic financial review and competitive intelligence to demonstrate that the risk-reward profile for ResMed is currently skewed to the downside. While the company remains the undisputed hegemon of sleep apnea, the “Philips Dividend” has been fully monetized, and the “GLP-1 Tax” has yet to be paid.

2. Competitive Advantage Assessment: The Anatomy of the Moat

2.1 The Ecosystem Lock-in: Data as a Barrier to Entry

ResMed’s competitive advantage is frequently misidentified as hardware superiority. In reality, flow generators (CPAP/APAP machines) are relatively commoditized electro-mechanical devices. The true durability of ResMed’s moat lies in its data integration strategy, which creates high switching costs for Durable Medical Equipment (DME) providers and physicians.

The mechanism of this lock-in is the AirView and AirSolutions ecosystem. In the United States healthcare system, reimbursement for Continuous Positive Airway Pressure (CPAP) therapy is contingent upon proof of adherence—typically defined by CMS (Centers for Medicare & Medicaid Services) as usage for greater than 4 hours per night on 70% of nights during a consecutive 30-day period.¹¹ ResMed’s cellular-connected devices automatically transmit this compliance data to the AirView cloud, which integrates directly with the billing software used by DMEs (often Brightree, which ResMed owns).

For a DME managing a patient census of 5,000 or 50,000 lives, the administrative friction of switching device manufacturers is prohibitive. Switching to a competitor like Fisher & Paykel or Löwenstein Medical would require fragmenting the data workflow, increasing administrative labor costs, and risking reimbursement denials due to data gaps. This “interoperability moat” has allowed ResMed to maintain dominance even when competitors offer lower-priced hardware.¹²

2.2 The “Razor-and-Blade” Economics

ResMed’s revenue model creates a powerful compounding effect.

• The Razor (Devices): Flow generators (e.g., AirSense 11) account for approximately 52% of revenue.¹⁰ These are capital purchases with lower gross margins (estimated ~50-55%).
• The Blade (Masks and Accessories): Masks, tubing, and filters account for ~36% of revenue but generate significantly higher gross margins (estimated ~70%+).¹⁰
• The Annuity: Once a patient is set up on a ResMed device, they are funneled into a resupply schedule. The integration of the myAir patient engagement app gamifies therapy, increasing adherence rates. Internal data suggests that patients using myAir are significantly more compliant, driving higher frequency of mask replacement orders. This recurring revenue stream is the primary driver of ResMed’s superior Return on Capital compared to pure-play hardware manufacturers.¹⁰

2.3 Manufacturing Scale and Supply Chain Resilience

During the supply chain crisis of 2021-2023, ResMed leveraged its scale to secure semiconductor allocation when competitors faltered. The company has further entrenched this advantage by opening a massive advanced manufacturing facility in Tuas, Singapore.¹³ This facility not only diversifies geopolitical risk away from China but also allows for unit cost reductions that smaller competitors cannot replicate. This scale advantage is evidenced in the recent gross margin expansion to 61.5% in Q1 FY2026, driven largely by manufacturing and logistics efficiencies.²

Table 1: Competitive Moat Analysis Matrix

Feature	Moat Strength	Durability	Threat Level
Data Ecosystem (AirView)	High	High. Embedded in payer reimbursement workflows.	Low. Requires massive IT overhaul for DMEs to switch.
Installed Base	High	High. 29M+ connected devices create data gravity.	Medium. Philips re-entry could erode future share.
Mask Compatibility	Medium	Medium. Interfaces are proprietary but copyable.	Medium. FPH (Fisher & Paykel) launching competitive masks.
SaaS Portfolio	Medium	Low. Software churn is easier than hardware churn.	High. Specialized competitors (PointClickCare) innovate faster.

3. The Philips Vacuum: Analyzing the “Super-Normal” Period

The current valuation of ResMed cannot be disentangled from the catastrophic regulatory failure of its primary rival, Philips Respironics. Analyzing this dynamic is critical to distinguishing between structural growth and temporary market capture.

3.1 The Event Horizon: Class I Recall and Consent Decree

In June 2021, Philips initiated a global recall of approximately 5.5 million sleep therapy devices due to the degradation of polyester-based polyurethane (PE-PUR) sound abatement foam, which released potential carcinogenic particulates.¹⁴ This event effectively removed ~40% of global supply from the market.

The regulatory fallout culminated in April 2024, when a U.S. federal court entered a consent decree against Philips Respironics.¹⁵ The terms are draconian:

• Suspension of Sales: Philips is prohibited from manufacturing or selling new sleep therapy devices (CPAP/BiPAP) at its key U.S. facilities until it demonstrates stringent compliance with FDA Quality System Regulations.¹⁶
• Remediation First: Philips must prioritize the remediation (repair/replace/refund) of all affected devices before resuming commercial sales.
• Independent Expert: An independent expert must audit Philips’ facilities for a period of years to ensure compliance.¹⁷

3.2 The “Philips Dividend”: Quantifying the Windfall

Since the recall began, ResMed has experienced a period of unchallenged dominance.

• Market Share Shift: Analysts estimate ResMed’s U.S. market share surged from ~50-55% pre-recall to 80%+ in 2024/2025.¹⁸
• Pricing Power: With demand far outstripping supply, ResMed was able to eliminate discounts and pass through inflationary costs. This is the primary driver behind the gross margin expansion from ~56% in FY2023 to 61.5% in FY2026.²
• Customer Acquisition: Thousands of sleep labs and DMEs that were historically “Philips shops” were forced to switch to ResMed infrastructure. Due to the high switching costs of the AirView ecosystem (discussed in 2.1), this share capture is stickier than typical commodity hardware share gains.

3.3 The Inevitable Re-entry Risk

While the consent decree is restrictive, it is not permanent. Philips has indicated that remediation is 99% complete as of late 2025.⁷ The company continues to sell in international markets, maintaining its brand presence.

Strategic Implications of Philips’ Return (Forecasted 2026):

• The Bundling Threat: Philips remains a giant in hospital patient monitoring and diagnostic imaging. It has deep relationships with Integrated Delivery Networks (IDNs). Upon re-entry, Philips will likely leverage cross-category bundling, offering deep discounts on CPAP machines to hospital systems that purchase their high-ticket MRI or CT scanners.⁸
• The “Second Source” Psychology: DMEs have been “held hostage” by ResMed’s pricing power for four years. There is significant pent-up demand for a second supplier to restore negotiating leverage. Even if Philips’ product is inferior, DMEs will likely allocate 20-30% of volume to Philips simply to force ResMed to the negotiating table on price.¹⁹
• Margin Erosion: To defend its 80% share, ResMed will be forced to re-introduce volume rebates and lower Average Selling Prices (ASPs). A 5% reduction in ASP flows directly to the bottom line, potentially compressing operating margins by 200-300 basis points.

4. The GLP-1 Disruption: Structural Threat to Terminal Value

The emergence of Glucagon-like peptide-1 (GLP-1) receptor agonists (e.g., semaglutide, tirzepatide) represents the single greatest threat to ResMed’s terminal value. While management dismisses the threat, the data suggests a complex, non-linear impact on the business.

4.1 The Mechanism of Obsolescence

Obstructive Sleep Apnea is mechanically linked to obesity in approximately 70% of cases. Excess adipose tissue in the pharyngeal walls collapses the upper airway during sleep. GLP-1s, which drive 15-25% body weight loss, directly address the root cause of the condition, whereas CPAP only treats the symptom (airway collapse).²⁰

4.2 The SURMOUNT-OSA Data: A “Functional Cure”

The results from Eli Lilly’s SURMOUNT-OSA phase 3 trial (published 2024) are unequivocal. In patients with moderate-to-severe OSA and obesity:

• AHI Reduction: Tirzepatide reduced the Apnea-Hypopnea Index (AHI) by a mean of 29.3 events per hour (approx. 63% reduction).²¹
• Disease Resolution: Crucially, 43-51% of participants met the criteria for disease resolution (AHI < 5, or AHI < 10 with no symptoms).²¹

This data implies that for half of the addressable market, GLP-1s are not just a therapy—they are a functional cure that eliminates the medical necessity for CPAP.

4.3 The “Tailwind” Narrative vs. Actuarial Reality

ResMed management aggressively promotes a “bull case” where GLP-1s expand the diagnostic funnel. They cite internal data showing that patients prescribed GLP-1s are 10.7% more likely to initiate PAP therapy.²² The logic is that patients engaging with the healthcare system for weight loss are screened for comorbidities.

However, a critical analysis reveals flaws in this narrative:

• Initiation vs. Retention: While initiation rates may spike due to increased screening, the retention (LTV) of these patients is highly suspect. If a patient loses 20% of their weight in Year 1, their OSA severity may drop from “Severe” (requiring CPAP) to “Mild” (asymptomatic). Mild OSA patients have historically low adherence to CPAP due to the discomfort of the device.
• Churn Dynamics: Real-world adherence to GLP-1s is low (approx. 40-50% at one year) due to cost and gastrointestinal side effects.²³ However, as oral GLP-1s (e.g., Orforglipron) enter the market (expected ~2026) and costs decline, adherence will improve.
• Actuarial Forecasts: Bearish models from firms like Citi and Kearney estimate that by 2030, widespread GLP-1 adoption could reduce CPAP device volumes by 10-23% relative to baseline forecasts.⁶ This structural volume decline would decimate the “growth” component of ResMed’s valuation multiple.

Table 2: Projected Impact of GLP-1s on ResMed Customer Cohorts

Patient Cohort	OSA Mechanism	GLP-1 Impact	Impact on ResMed LTV
Morbidly Obese (BMI > 40)	Anatomical Collapse	High efficacy. Significant AHI reduction.	Neutral: Likely still need CPAP, but pressure settings may drop.
Obese (BMI 30-40)	Anatomical/Soft Tissue	High efficacy. Potential “Functional Cure.”	Negative: High risk of churning off CPAP as symptoms resolve.
Non-Obese OSA	Craniofacial Structure	Low/No efficacy.	Neutral: No change. Core customer base remains.
Cardiovascular Comorbid	Mixed	High efficacy. Reducing CV risk is priority.	Negative: Doctors may prioritize GLP-1 over CPAP for CV risk reduction.

5. Financial Analysis: Quality of Earnings and Capital Discipline

5.1 Revenue Analysis: Decomposing the Growth

ResMed reported revenue of $5.26 billion for the trailing twelve months ending September 30, 2025, representing a 9.36% year-over-year growth.²⁵ While headline growth is solid, the composition warrants scrutiny.

• Masks vs. Devices: Growth is increasingly driven by the “Masks and Other” segment (up 11% in Q2 FY2025) rather than devices (up 10% but slowing).²⁶ This is a positive for gross margins (masks have ~70%+ GM vs. ~55% for devices) but raises concerns about the health of the installed base. Mask growth is a derivative of the active installed base; if device sales slow (due to GLP-1s or market saturation), mask revenue will eventually decelerate.
• SaaS Growth Fatigue: The Residential Care Software (SaaS) division grew only 5.9% in Q1 FY2026.²⁷ This is significantly below the “double-digit” targets often cited by management during acquisitions. It suggests that the SaaS business, despite billions in capital deployment, is maturing rapidly and failing to provide the high-growth engine needed to offset potential hardware declines.

5.2 Margin Structure: Peak Profitability?

Gross margins hit 61.5% in the most recent quarter ², a multi-year high.

• Tailwinds: The primary drivers are the normalization of freight costs (which crushed margins in 2022) and manufacturing efficiencies from the Singapore plant.
• Headwinds: As discussed, the re-entry of Philips will likely force pricing concessions. Furthermore, the shift in mix toward lower-margin SaaS revenue (if it ever re-accelerates) could be dilutive. It is highly probable that 62% represents a structural ceiling for gross margins in the current competitive configuration.

5.3 Capital Allocation: The SaaS “Diworsification”

ResMed’s capital allocation strategy under CEO Mick Farrell has defined a pivot toward “out-of-hospital” software.

• Major Acquisitions:

• Brightree ($800M, 2016): Leader in HME billing. Strategic fit: High.
• MatrixCare ($750M, 2018): Skilled nursing/senior living. Strategic fit: Low.
• MEDIFOX DAN ($1B, 2022): German out-of-hospital software. Strategic fit: Medium.
• ROIC Impact: ResMed’s ROIC has declined from historical highs of ~25% to 20.6% currently.²⁸ This compression is mathematically driven by the accumulation of goodwill from these acquisitions. The SaaS assets operate in competitive, fragmented markets with lower barriers to entry than the FDA-regulated device market. The failure of the SaaS division to grow double-digits organically ²⁹ suggests that capital deployed here is generating returns below the company’s weighted average cost of capital (WACC) when adjusted for acquisition premiums.

5.4 Executive Compensation Alignment

A review of the 2024 and 2025 Proxy Statements reveals an executive compensation structure heavily weighted toward Total Shareholder Return (TSR) and revenue growth, with less emphasis on ROIC.

• Incentive Structure: Short-term incentives are tied to Net Sales (50%) and Operating Profit (50%).³⁰ Long-term incentives (PSUs) are tied to Absolute TSR (50%) and Relative TSR (50%).³⁰
• Misalignment: The lack of an ROIC metric in the long-term incentive plan encourages “empire building” (revenue growth via M&A) rather than disciplined capital efficiency. This explains the aggressive SaaS acquisition spree despite dilutive returns.

Table 3: Recent Insider Trading Activity (Mick Farrell, CEO)

Date	Transaction	Shares Sold	Value	Price	Context
Dec 09, 2025	Sale (10b5-1)	4,991	~$1.25M	~$251	Selling into near-ATH strength.
Nov 07, 2025	Sale (10b5-1)	8,011	~$2.00M	~$249	Continued liquidation.
Aug 07, 2024	Sale	14,683	~$3.15M	~$214	Selling post-earnings.

Sources: ³¹

Insight: The consistent selling by the CEO, particularly the adoption of new 10b5-1 plans in late 2024 ³⁴, suggests a desire to liquidity equity at current valuations, potentially anticipating future headwinds that the market is ignoring.

6. Valuation Analysis: The Price of Perfection

6.1 Relative Valuation

ResMed trades at a P/E (TTM) of 25.82x and an EV/EBITDA of 18.5x.³⁵

• Peer Comparison: This is a premium compared to the broader medical device sector (approx. 19-20x) and significantly higher than Philips (16.2x).³⁷
• PEG Ratio: With earnings growth forecast at roughly 10-14% (aided by buybacks), the PEG ratio sits around 2.0x. A PEG of 2.0 typically implies a company with a long, unobstructed runway for growth. Given the GLP-1 obstruction, this multiple appears fragile.

6.2 Reverse DCF: What is Priced In?

To justify the current share price of ~$250, a reverse Discounted Cash Flow (DCF) model requires the following assumptions:

• WACC: 8.5%
• Terminal Growth: 3.5%
• FCF Growth: 12% annually for the next 10 years.

Critique: Achieving 12% FCF growth for a decade is incredibly difficult for a mature company, especially one facing a potential 10-20% volume erosion from GLP-1s. A more realistic “Bear Case” DCF, assuming 5% terminal growth for devices and 2% terminal growth for the company overall (blended), yields an intrinsic value closer to $180-$190, suggesting 25-30% downside risk.

7. Risk Assessment

7.1 Quantitative Risks

• Gross Margin Compression: A return to 57% margins due to Philips’ pricing pressure would reduce EPS by approx. $0.60-$0.80 per share.
• Multiple Contraction: If the market re-rates RMD from a “Growth” stock (26x) to a “Mature Medtech” stock (18x) due to GLP-1 fears, the stock could decline by 30% even if earnings remain flat.

7.2 Qualitative Risks

• Regulatory Risk (CMS Bidding): The next round of Medicare Competitive Bidding is expected to begin in late 2025/2026.³⁸ Historically, these rounds have resulted in reimbursement cuts, forcing DMEs to demand lower prices from manufacturers.
• SaaS Execution: Continued deceleration in MatrixCare/Brightree growth could lead to goodwill impairment charges, impacting GAAP earnings.

8. Conclusion and Recommendation

ResMed is a company of undeniable quality that is currently enjoying the benefits of a distorted competitive landscape. The temporary exit of Philips Respironics has allowed ResMed to over-earn on margins and mask the slowing organic demand for sleep devices.

However, the future holds a convergence of threats that the current valuation ignores. The GLP-1 revolution fundamentally alters the disease burden of sleep apnea, threatening to turn a “lifetime therapy” market into a “bridge therapy” market. Simultaneously, the return of Philips will reintroduce price competition, capping margin expansion.

Management’s capital allocation strategy—selling expensive hardware to buy lower-growth software—has not created sufficient value to offset these risks. The lack of ROIC metrics in executive compensation and the persistent insider selling further undermine the bull case.

Recommendation:

Investors should view ResMed as a source of funds. The stock is priced for a “blue sky” scenario where GLP-1s fail to impact volumes and Philips fails to regain share. The probability of this scenario is low. The risk of a structural de-rating is high.

Investment Stance: Avoid / Sell Strength.

• Catalyst for Downside: Philips U.S. re-entry (2025/2026) or quarterly data showing SaaS growth deceleration.
• Catalyst for Upside: Failure of oral GLP-1 trials or a permanent exit of Philips from the sleep market (unlikely).

Frequently Asked Questions

1. General Questions: What thoughtful questions have other investors asked?

Smart money investors are currently focused on three specific debates that determine the terminal value of this stock:

• The “Terminal Terminal” Risk: “Does the rise of GLP-1 weight-loss drugs (Ozempic/Mounjaro) permanently lower the severity of sleep apnea in the population, turning a lifetime CPAP patient (30+ years of revenue) into a temporary patient (2-3 years)?”
• The Philips Market Share Reversion: “DMEs (Durable Medical Equipment providers) prefer dual-sourcing to keep prices low. When Philips returns to the US market (expected 2025/2026), will ResMed lose 15-20% of its market share simply because DMEs need a second supplier to force price competition?”
• SaaS “Diworsification”: “Why is management aggressively acquiring low-margin, low-growth software assets (MatrixCare/Brightree) that dilute the company’s overall ROIC? Are they seeing a slowdown in the core sleep business that the market is missing?”

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2. Cyclicality & Earnings Nature

• Are earnings at a cyclical high or low? Cyclical High. ResMed is currently “over-earning.” The recall of its main competitor (Philips) created a monopoly-like environment where ResMed enjoyed unprecedented pricing power and volume. As Philips re-enters the market and supply chains normalize, ResMed’s gross margins (currently peaked at ~61-62%) face natural compression pressure.
• Driven by external environment or internal actions? Primarily External. While management executed well during supply shortages, the primary driver of the recent “super-normal” growth was the regulatory exit of Philips.
• How stable are revenues? High Stability. The “Razor/Blade” model provides exceptional stability. Once a patient is on a device (the razor), they require masks, tubing, and filters (the blades) 2-4 times a year. This recurring revenue stream accounts for ~65-70% of profits, making revenue sticky even during economic downturns.
• Outlook for products/services? Mixed. Short-term demand for devices (AirSense 11) is strong. Long-term demand faces an existential question mark from GLP-1s, which could reduce the total addressable market of severe sleep apnea patients by treating the root cause (obesity).
• Market Size & Growth: The core sleep apnea device market typically grows at mid-single digits (4-6%). Management claims a massive “undiagnosed” market (nearly 1 billion people), but the diagnosed and treated market grows much slower. It is a global market, but the US is the profit engine due to higher reimbursement rates.

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3. Business Quality & Competitive Moat

• Is the industry getting more or less competitive? More Competitive. For the last 3 years, it was less competitive (monopoly). Now, it is becoming more competitive as Philips returns and oral appliance makers (like Vivos) and implant makers (Inspire Medical) gain traction.
• Profitability (ROIC & ROE):
  • ROIC: ~20-23%. This is excellent, but down from historical highs of ~28% due to expensive software acquisitions.
  • ROE: ~23-25%. Strong leverage of equity.
• Barriers to Entry: High. FDA regulatory hurdles are significant. However, the highest barrier is the “Data Ecosystem.” DMEs use ResMed’s software (AirView) to manage patients. Switching to a new device manufacturer requires retraining staff and changing software workflows, which is a massive headache.  
• Can it be undermined by foreign low-cost labor? No. This is a regulated medical device market. Trust and compliance with payers (Medicare) matter more than the lowest hardware cost. “Generic” CPAPs have failed to gain traction because they lack the cloud connectivity DMEs need to get paid by insurance.
• Do brands matter? Yes, to the DME and Physician. Patients rarely choose their brand; their doctor or equipment provider does. ResMed has the strongest brand trust among these B2B buyers.
• Switching Costs: High for DMEs, Low for Patients. A patient can switch masks easily. A DME provider cannot switch device fleets easily without disrupting their billing and compliance operations.

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4. Financial Condition & Balance Sheet

• Assets not fully recognized? Data. ResMed owns the largest repository of sleep breathing data in the world (20B+ nights of data). This is an intangible asset that could be monetized for AI diagnostics or population health management, currently valued at zero on the books.  
• Off-balance sheet liabilities? Minimal. Primarily standard operating leases for facilities. There are no complex variable interest entities or hidden debt structures.
• Accounting Conservatism: Moderate. Be cautious of “Non-GAAP” adjustments. Management aggressively excludes “amortization of acquired intangibles” from their Non-GAAP earnings. Since their strategy is growth-by-acquisition, these costs are arguably real expenses they keep ignoring to show higher EPS.
• CapEx Hungry? No. This is a capital-light business (CapEx ~2-3% of sales). Manufacturing is outsourced or highly automated. Most cash flow can be returned to shareholders.

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5. Capital Allocation & Management

• Free Cash Flow (FCF) Usage: Management has shifted from dividend growth to M&A. They have spent billions acquiring software companies (Brightree, MatrixCare, MEDIFOX DAN) at high valuations.
  • Critique: These acquisitions have diluted ROIC. The software businesses grow slower (mid-single digits) than the core mask business, raising concerns they are “diworsifying.”
• Share Buybacks: Inconsistent. They tend to buy back shares to offset stock-based compensation dilution rather than aggressively shrinking the share count when the stock is cheap.
• Insider Issuance: High. Management pays themselves heavily in stock options and restricted stock units (RSUs).
• Management Motivations & Compensation:Red Flag. Executive bonuses are tied to Revenue Growth and Absolute TSR (Total Shareholder Return).
  • Why this is bad: Targeting revenue growth incentivizes them to buy companies (M&A) to make the top line bigger, even if it hurts returns on capital. They are not paid on ROIC, which would force them to be disciplined.
• Insider Selling: Active. CEO Mick Farrell has been a consistent seller of stock near recent highs. There has been almost no open-market buying by insiders in recent years.

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6. Valuation & Market Data

• Stock Structure: NYSE: RMD. It is a standard US corporation (Delaware), not an ADR or MLP. No K-1.
• Dividend Policy: Pays a quarterly dividend yielding ~1.0%. Payout ratio is conservative (~25%), leaving room for growth, but the yield is negligible for income investors.
• Net Income vs. Cash Flow Divergence: Healthy. Cash flow from operations generally exceeds Net Income, which is a sign of high-quality earnings (earnings are backed by actual cash).

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7. Risks & Downside

• Factors causing decline:
  1. GLP-1 Data: Any study showing weight-loss drugs reduce sleep apnea severity significantly will crush the stock multiple.
  2. Philips Aggression: If Philips returns with a “fire sale” price strategy to win back customers, ResMed will lose margin.
• Catastrophic Loss Risk: Low. The company has no net debt (cash > debt) and sells a product required for life support. Bankruptcy is virtually impossible.
• Chance of Total Loss: Near Zero. Even in a worst-case scenario (GLP-1s take 30% of market), the remaining business is a cash cow.

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8. Recent News & Events

• Changed Environment: The “Philips-free” market is ending. Philips reached a consent decree in 2024 and is remediating devices. A full commercial return is the next phase (late 2025/2026).  
• New Production: Opened a major manufacturing hub in Singapore to diversify away from China and increase margin efficiency.
• Acquisitions: The acquisition of MEDIFOX DAN ($1B) in Germany was the latest major move, further pushing them into software.  

Summary of “The Catch”

ResMed is a great business being managed like an empire builder. They have a dominant moat in sleep apnea, but they are using the cash from that monopoly to buy lower-quality software businesses. Combined with the threat of weight-loss drugs shrinking their total market, the current valuation (high 20s P/E) assumes a growth rate that may no longer exist in 3-5 years.

Investor Checklist

• Bull Case: GLP-1s fail to reduce sleep apnea, Philips destroys its own brand permanently, and ResMed maintains 80% market share forever.
• Bear Case: GLP-1s cure mild/moderate apnea, Philips claws back 20% share via pricing, and management wastes cash on low-return software buyouts.

Works cited

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2. Resmed Inc. Announces Results for the First Quarter of Fiscal Year …, accessed December 18, 2025, https://investor.resmed.com/news-events/press-releases/detail/412/resmed-inc-announces-results-for-the-first-quarter-of-fiscal-year-2026
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