ResMed’s half-year FY25 results: solid growth & expanding opportunities
ResMed’s (ASX:RMD) half-year FY25 results reflect a company that is not only thriving in its core business but is also strategically positioned to capitalise on future growth opportunities.
The company is currently at the forefront of respiratory healthcare innovation with a market capitalisation of $59 billion at $39 per share. The share price, which has risen 33 per cent over the past year, materially outperformed the ASX 100’s 9.9 per cent gain over the same period, indicating growing investor confidence in the firm’s trajectory.
Financial performance
ResMed delivered impressive growth across key metrics for the first half of the 2025 financial year, underscoring sound fundamentals and operational performance.
While ResMed recorded US$4.69 billion in sales for FY24, up from US$4.22 billion in FY23, the company is forecast to achieve US$5.25 billion in FY25.
Led by growth in the U.S., ResMed’s first half achieved 12 per cent revenue growth over the same period last year, with devices and masks both growing by 11 per cent in constant currency terms during Q2., consistent with Q1.
Notably, the company maintained software as a service (SaaS) organic growth of nearly 10 per cent for the half, while margins expanded 230 basis points year-over-year, reaching 59.2 per cent.
The company also executed a stock buyback worth $125 million during the half, highlighting its strong cash flow generation of over US$600 million. Operational leverage further improved ResMed’s operating margins, reinforcing its reputation for reliable growth.
Strategic growth drivers
ResMed’s Chairman and CEO, Mick Farrell noted “Our second quarter fiscal year 2025 top-line growth, margin expansion, and double-digit earnings per share (EPS) growth were the result of increased demand for our sleep health and breathing health products and digital health solutions that people love, as well as our laser-focus on operational excellence.”
ResMed continues to expand its penetration within the U.S., where market penetration exceeds 10 per cent, while international markets remain under 10 per cent, presenting significant room for growth. The total addressable market (TAM) is projected to expand from 935 million people to 1.2 billion by 2050, even accounting for potential disruptions from GLP-1 drugs.
The company is building advanced databases and connectivity systems to optimise service delivery, streamline product repurchases, and enhance SaaS growth. The SaaS business is diversifying beyond sleep apnea to address other medical conditions.
ResMed is tapping into new growth avenues, particularly in the rapidly growing ventilation market, including chronic obstructive pulmonary disease (COPD) and heart-related ventilation and oxygen therapy.
Valuation and outlook
ResMed’s improving margins and steady growth underpin its valuation. Using a 12-year average price-to-earnings ratio (PER) of 30 times FY24 EPS, the company’s valuation is estimated at $45.00 per share and factors in favourable currency movements, particularly the depreciation of the Australian dollar.
Risks and outlook
While ResMed’s outlook is positive, investors should monitor several factors that could influence performance, including fluctuations in the Australian dollar, euro, and U.S. dollar, while keeping in mind expansion in U.S. and European markets will be critical for sentiment.
ResMed also faces competition from Fisher & Paykel Healthcare (ASX:FPH) and Respironics, as well as from drugs like Ozempic, which may affect continuous positive airway pressure (CPAP) device compliance and market dynamics.
Gross profit, which grew from US$2.39 billion in FY23 to US$2.70 billion in FY24, is expected to increase to US$3.12 billion in FY25.
Adjusted net profit after tax (NPAT) rose to US$1.10 billion in FY24, compared to US$950 million in FY23, and is anticipated to rise to US$1.35 billion in FY25.
Adjusted EPS increased from US$6.47 in FY23 to US$7.83 in FY24 and is projected to grow to US$9.18 in FY25.
Finally, ResMed’s dividends per share (DPS) climbed from US$1.80 in FY23 to US$1.97 in FY24 and are forecast to hit US$2.32 in FY25.
ResMed’s first half-year FY25 results demonstrate its ability to drive sustained growth while leveraging innovation and strategic market expansion. With strong financials, consistent operational performance, and an expanding addressable market, we currently believe the company is well-positioned to deliver long-term value for investors, with careful monitoring of market risks and competitive pressures remaining essential.
The Montgomery Fund and the Montgomery [Private] Fund owns shares in ResMed. This article was prepared 3 February 2025 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade ResMed, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
