ResMed Inc.RMDNYSE

Overview Intelligence Charts News Fundamentals

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $358.60 per share(market-calibrated)

+38.8%

Upside to Fair Value

Current

$258.28

Pure Model

$365.86

Fair Value

$358.60

Bull Case

$475.71

Bear Case

$276.43

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

1.40%

Calibrated Growth

2.60%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $365.86.

What's Driving This Ratingfor RMD

✓

CapEx already efficient

CapEx at 2.38% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 36.71% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 9.69% revenue growth, fading to 3.00% by Year 10. Revenue reaches $10.6B (vs $5.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $306.27/share (19.3x terminal FCF) while exit multiple gives $425.45/share (31.0x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 1.40% perpetual growth — 160bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 77.39% indicates efficient cash generation. FCF reaches $3.3B by Year 10 (31.52% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.88

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.45%

Cost of Debt

Pre-tax Cost of Debt3.57%

Tax Rate16.50%

After-tax Cost of Debt2.98%

Equity Weight (E/V)97.80%

Debt Weight (D/V)2.20%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (97.80% × 8.45%) + (2.20% × 2.98%)

= 8.33%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$5.6B	$6.5B	$7.8B	$9.2B	$10.6B
EBIT	$2.1B	$2.4B	$2.9B	$3.4B	$3.9B
Tax	$342M	$393M	$472M	$559M	$641M
NOPAT	$1.7B	$2.0B	$2.4B	$2.8B	$3.2B
+ Depreciation	$227M	$261M	$313M	$371M	$425M
- Capex	$134M	$154M	$185M	$219M	$251M
- Δ NWC	$132M	$111M	$210M	$181M	$82M
Free Cash Flow	$1.7B	$2.0B	$2.3B	$2.8B	$3.3B
Discount Factor	0.923	0.787	0.670	0.571	0.449
Present Value	$1.6B	$1.6B	$1.5B	$1.6B	$1.5B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.3B

Terminal Growth Rate3.00%

WACC8.33%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$64.5B

PV of Terminal Value$29.0B

Exit Multiple Method

Year 10 EBITDA$4.3B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$103.4B

PV of Terminal Value$46.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$15.6B

PV of Terminal Value$29.0B

Enterprise Value$44.6B

(-) Net Debt-$358M

Equity Value$44.9B

Shares Outstanding147M

Price per Share$306.27

Exit Multiple Method

PV of Projected FCFs$15.6B

PV of Terminal Value$46.5B

Enterprise Value$62.1B

(-) Net Debt-$358M

Equity Value$62.4B

Shares Outstanding147M

Price per Share$425.45

Pure Model Fair Value

$365.86

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
6.33%	$456.21	$475.96	$501.66	$536.44	$586.18
7.33%	$395.38	$407.07	$421.47	$439.63	$463.25
8.33%	$349.45	$356.95	$365.86	$376.61	$389.86
9.33%	$312.87	$317.96	$323.86	$330.76	$338.97
10.33%	$282.72	$286.32	$290.41	$295.10	$300.53

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$276.43

7.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.10

Base Case

$365.86

41.7% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.88

Bull Case

$475.71

84.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.75

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.69%

Year 3 Revenue Growth6.88%

Year 5 Revenue Growth11.32%

Year 7 Revenue Growth7.99%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin36.71%

Tax Rate16.50%

Historical Capex / Rev2.38%

NWC / Revenue26.55%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

Explore More

S&P 500 Screener

Filter and sort all 500 stocks

Market Movers

Today's biggest gainers and losers

Market Heatmap

Visual sector performance