ResMed (ASX:RMD): Investors who bought the dip would be satisfied, but is there any growth left in this one?

ResMed (ASX:RMD) is one of the few ASX healthcare stocks that has successfully made it in the USA. And while Trump’s tariffs have caused headaches for many healthcare stocks, ResMed might even be a beneficiary of them. Yes, there was a temporary dip in the share price, but shares are up more than 20% in 2025.

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Who is ResMed?

ResMed is a company that sells cloud-based medical devices to people suffering from sleep apnea, Chronic Obstructive Pulmonary Disease (COPD) and other respiratory disorders. It was founded in Sydney in 1989 to commercialise CPAC technology that had been developed at the University of Sydney earlier in the 1980s. It was co-founded by Dr. Peter Farrell, and today the company is led by his son Michael.

It has since redomiciled to San Diego and is listed on Wall Street as well as the ASX – each ResMed share on the NYSE represents 10 on the ASX. It services 140+ countries, employs >10,000 people and makes US$5bn in revenue per quarter.

The company benefits more than it otherwise would because it offers in-home solutions and sleep apnea can take a while to diagnose, meaning customers come through the door slowly but steadily. The last time it gave an estimate of how many people it helped was in FY23, during which the company claimed to have helped 160 million people.

A COVID boom, followed by a hangover?

In the five years prior to COVID, it generated average annual earnings growth of 9%. The pandemic was a boom time for it because of the need for ventilators. The September quarter of 2023 saw a dip after the company’s quarterly and annual results. Gross margins contracted 80 basis points to 55.8%, on account of higher component and manufacturing costs, partially (but not completely) offset by an increase in selling prices.

There were also concerns about what weight loss drugs like Ozempic and Wegovy could do. Because if you reduce obesity, you could reduce the need for treatments such as sleep apnoea machines saw the market overly fearful around the impact it will have on RMD’s addressable market.

We say overly fearful deliberatly, because we aren’t fearful. We think even if you reduce obesity and stop conditions requiring ResMed’s machines as a treatment, this doesn’t wipe out those who already have these conditions. Moreover, there is no evidence Ozempic can reduce sleep apnea in and of itself. You could even argue that Ozempic may make people more aware of their health and seek airway pressure therapy as another way to improve their health

A great CY25

As we mentioned, the key headache for many investors has been Trump’s tariffs. With the threat of tariffs of over 100% in some instances, there was the threat of a significant dent in many company’s bottom lines.

In April 2025, ResMed told investors it was exempt from tariffs, but even so would seek to double its US manufacturing footprint. This was due to the Nairobi protocol which guarantees duty-free treatment for products that help people with disabilities. Yet, the tariffs also mean that ResMed will be immune from cheaper imports and people will pay a premium for ResMed’s solutions which enable diagnosis and treatment to occur in the comfort of their own homes.

On May 1, the company announced it was buying VirtuOx, an independent diagnostic testing facility for sleep, respiratory and cardiac conditions. It has a virtual testing platform that can diagnose conditions, and provide a ‘sales funnel’ for ResMed. Many people may just ‘give up’ on seeking treatment if its too hard to get diagnosed – this is the problem VirtuOx is seeking to solve. ResMed has not disclosed how much it is paying but has said the acquisition is ‘not material to ResMed’s financial results’.

Last week, ResMed revealed its results for CY25 (the 12 months to June 30, 2025) as well as the last quarter. Revenue increased 10% to US$5.1bn, its gross margin was 59.45%, operating cash flow of $1.8bn, and its EPS was $9.51. The latter figure translates to a net profit of $1.4bn, which was up 37% from the year before.

The company credited its value propositions and also procurement, manufacturing and logistics efficiencies. No specific guidance for FY26 was given, but the company said,’ We will continue to invest in innovation, scale our digital health capabilities and partner with patients, providers, payers and policymakers to ensure more people around the world have access to the care they need to sleep better, breathe better, and live longer and healthier lives’.

Solid growth ahead

Analysts are neutral on where this company is going in 12 months from a share price perspective – with the average price being roughly flat. But they are optimistic about the company’s growth prospects, calling for US$5.6bn revenue and a $1.5bn profit (up 9% and 11% respectively) in FY26. Turning to FY27, they expect $6bn revenue and a $1.7bn profit (up 7% and 10% respectively).

We think there is a significant long-term growth opportunity in ResMed as long as is able to maintain control over its margins. There are few other companies having an impact on so many people than this one. There may be short-term volatility, but investors who buy and hold for a few years should not be disappointed.