Dr. Stoxx
Stock Trader & Author, Oxford DPhil, Trading Education
ResMed is a solid value play in sleep-disorder medtech, and it is unclear why it has been so out of favor. It trades at just 20 times trailing earnings with tons of free cash flow and an average price target of $280. It is now breaking its long downtrend on good volume and holding a supply zone, making it possibly a good add to long-term value holdings. x.com x.comÂ
ResMed's GLP-1 selloff reflects a temporary fear that misreads the business. Sleep apnea affects hundreds of millions of mostly undiagnosed people, leaving decades of growth even with weight-loss drugs, and people on these drugs get diagnosed faster because they see doctors more. ResMed has a wide moat in a near-duopoly with Philips, which lost share after its recalls, high and stable margins and ROIC, and sticky software. A long-term compounder at a very reasonable valuation. x.comÂ
Zoetis, ResMed, Netflix, Progressive, Kinsale, Brown & Brown and CME Group offer far more interesting valuations than the S&P 500, whose average P/E of about 25.6 is historically elevated, per GuruFocus. Their P/Es range from 11.69x for Progressive and 12.51x for Zoetis to 23.22x for Netflix. x.comÂ
ResMed faces substitution from GLP-1 drugs and forthcoming oral therapies, while US intermediaries make it difficult to turn new sleep-apnea diagnoses into treatment. Better detection could help, but that penetration hurdle persists; amid these pressures, the stock's gains this year and proximity to all-time highs are puzzling. How much severe apnea overlaps with obesity remains an open question. x.com x.com x.comÂ
The market is overlooking several top-tier businesses that trade at low earnings multiples. ResMed trades at 18.57x, Kinsale Capital at 13.11x, Brown & Brown at 16.48x, Allegion at 17.34x, Automatic Data Processing at 21.29x, Installed Building Products at 21.23x and NVR at 14.28x. x.comÂ
