Should You Reconsider ResMed After Its 24% Share Price Surge in 2025?

If you’re weighing up what to do with ResMed stock right now, you’re not alone. Investors have had plenty to think about lately. After all, ResMed’s share price has posted a robust 23.6% gain so far this year, tacking on a tidy 20.2% over the past twelve months. Even within the past week, shares climbed another 4.2%. That kind of momentum is hard to ignore, especially given how steady performance has been over the longer term. A 65.6% return over five years is impressive by almost any standard. Some of these moves have come as investors reassess industry risks, with broader market optimism helping to buoy healthcare equities like ResMed and shifting perceptions of growth potential in the sector.

But with the price moving higher, the big question is whether the shares are still attractively valued, or if the easy wins are in the rear-view mirror. Right now, ResMed’s valuation score stands at 2 out of 6, indicating the company is undervalued in just 2 of the key checks most analysts look at. That means any investment decision comes down to how you interpret the evidence from different valuation methods, and as you’ll see, sometimes the numbers don’t tell the full story. Let’s dig into what the traditional valuation checks are signaling, and stick around for a better way to gauge value that investors sometimes miss.

ResMed scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: ResMed Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and then discounting those figures back to today’s dollars. This helps investors gauge whether a stock’s current price reflects its true underlying worth based on expected future cash generation.

For ResMed, analysts estimate the company’s Free Cash Flow for the last twelve months at approximately $1.62 billion. Looking ahead, projections show steady annual growth, with Free Cash Flow anticipated to reach about $2.31 billion in 2035. The first five years of these projections are based on analyst estimates, while figures beyond that rely on more generalized growth assumptions. All cash flow figures are stated in $.

Based on this approach, the DCF model calculates ResMed’s intrinsic value at $274.75 per share. Compared to current pricing, this suggests the stock is about 2.8% overvalued, representing a very modest premium to its calculated fair value.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for ResMed.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out ResMed's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: ResMed Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like ResMed, as it reflects how much investors are willing to pay today for a dollar of earnings. For established businesses with positive earnings, the PE ratio offers a snapshot of market sentiment about the company’s growth outlook and level of risk.

Generally, companies with higher expected earnings growth and lower perceived risk tend to command higher PE ratios, while more mature or riskier firms see lower multiples. The “right” PE ratio for a stock is rarely static and should be evaluated with respect to industry norms and the company’s unique position.

ResMed is currently trading at a PE ratio of 29.4x. This is just below the industry average for Medical Equipment companies, which sits at 30.5x, and lower than the peer average of 33.2x. However, rather than relying solely on these benchmarks, Simply Wall St’s proprietary “Fair Ratio” provides a tailored baseline. The Fair Ratio for ResMed is 25.5x, designed to reflect its earnings growth prospects, margins, risk profile, industry context, and market cap. Since this figure adjusts for factors specific to ResMed, beyond simple peer group comparisons, it is a more meaningful guide for fair value assessment.

With ResMed’s current PE sitting slightly above its Fair Ratio, it appears the market is assigning a modest premium to the stock. The difference, however, is not dramatic, which points to a valuation that is quite reasonable by sector standards.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your ResMed Narrative

Earlier we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your unique investment story for a company, connecting your perspective on its products and market trends to financial forecasts like future revenue, earnings, and profit margins, and ultimately to an estimated fair value. Narratives let you bridge the gap between what the business is doing in the real world and what those actions mean for its valuation, so you are not just reacting to numbers but making sense of why they matter.

On Simply Wall St’s Community page, Narratives are an easy tool used by millions of investors to define what they believe will drive a company’s future. With Narratives, you can map out your own thesis for ResMed and see how your estimated fair value compares to the current share price, helping you decide whether the stock is a buy, sell, or hold based on your own research rather than relying on consensus or past data.

Because Narratives update automatically as new facts come in, such as earnings results, industry news, or regulatory changes, you can always test and refine your outlook as circumstances change. For example, some investors may see global sleep apnea treatment growth and digital health innovation propelling ResMed’s value as high as $325 per share, while others, concerned about competition and lower margins, estimate fair value closer to $215. This makes Narrative-building a powerful lens for smarter investing.

Do you think there's more to the story for ResMed? Create your own Narrative to let the Community know!

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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