ResMed (RMD) shares edged down slightly after a recent day of trading, as investors considered how the company's long-term outlook compares to its strong performance over the past year and its solid year-to-date gains.
ResMed’s share price has cooled off after a brief dip, but the big picture tells a different story. Momentum is clearly building. Even after the recent pullback, the stock is still up more than 21% year-to-date and has delivered a 17.8% total shareholder return over the past twelve months, suggesting that investors remain optimistic about its growth potential.
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With shares trading just below analyst targets and growth metrics still robust, the question now is whether ResMed is undervalued or if the market has already factored in the company’s strong prospects. Is there still room for investors to benefit, or is future growth already reflected in the current price?
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Most Popular Narrative: 4.8% Undervalued
With ResMed trading at $277.88 and the most widely followed narrative putting fair value at $291.86, there is a striking difference between the current price and expected upside. Investors are sizing up whether growth catalysts justify this higher target.
Strategic investments in expanding the diagnosis and treatment funnel, including acquisitions like VirtuOx, Ectosense, and Somnoware, are improving patient flow from screening to therapy. This positions ResMed to capture a larger share of the substantial underpenetrated global sleep apnea and respiratory market and supports long-term revenue growth.
Want to know what powers this premium valuation? The full forecast is built on ambitious growth targets for both earnings and margins, as well as future shareholder returns. Serious projections underpin the narrative. Are you ready to see what is fueling that fair value?
However, tightening reimbursement or tougher competition from new therapies could quickly challenge these bullish projections and limit ResMed’s future earnings growth.
Another View: SWS DCF Model Offers a Different Take
If you look at the SWS DCF model, the result tells a different story and suggests that ResMed is actually trading above its estimated fair value. This approach takes projected cash flows into account and points to the share price being a little ahead of itself. Could this mean there is downside risk if the growth narrative does not play out as expected?
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ResMed for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Build Your Own ResMed Narrative
Feel like crafting a story that better fits your perspective? Dive into the data yourself and build a narrative from scratch in just minutes: Do it your way.
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding ResMed.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.
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Develops, manufactures, distributes, and markets medical devices and cloud-based software applications to diagnose, treat, and manage respiratory disorders in the United States and internationally.
