ResMed's Valuation Gap: Fund Managers Say GLP-1 Fears Don't Add Up

A persistent weight-loss drug disruption narrative has left ResMed cheap against its own growth, and a July divestment sharpened the case further.

7 Oct 2026 · 4 min read

ResMed has spent nearly two years trading down against its own earnings growth, as a persistent narrative that GLP-1 weight-loss drugs will cure sleep apnea pushed its valuation from a five-year average near 29 times forward earnings to around 15 times and close to a 52-week low, even as the business kept delivering double-digit growth. Fund managers overwhelmingly describe the gap as sentiment rather than substance, and a July divestment has now simplified the story further.

A narrative that won't die, despite the evidence

Wilson Asset Management used ResMed as a cautionary example of the cost of selling into a scare, pointing out the stock first fell in 2023 on fears about Ozempic, and that anyone who sold then missed a 60 percent rally by the end of last year. Alliance Bernstein described the current mood bluntly, noting the company keeps posting great earnings while the share price goes down, and argued that two years into the weight-loss drug narrative, the clinical and real-world evidence increasingly points the other way, with GLP-1 drugs looking complementary to CPAP therapy rather than a replacement for it.

Paradice Investment Management, which counts ResMed among its preferred healthcare picks, said its own conversations with sleep doctors around the world consistently find that GLP-1 drugs only work for weight loss if patients stay on them for life, a real adherence problem, and that CPAP remains necessary alongside them regardless. ClearBridge Investments made a similar case, arguing the entire med-tech sector has fallen out of favour partly for reasons that have nothing to do with ResMed specifically, including unrelated concerns about US health insurers denying claims, and that obstructive sleep apnoea still has only around a 20 percent recognition and treatment rate in the US market, leaving plenty of room to grow regardless of what happens with weight-loss drugs.

The numbers behind the dominant franchise

ECP Asset Management described North America as ResMed's primary revenue driver, where it holds an industry-leading market share exceeding 80 percent in both CPAP devices and masks, a position built on continuous research and development investment that has left competitors struggling to keep pace globally. Investors Mutual Limited put the disconnect in numbers: more than 15 million cloud-connected patients, quarterly earnings growth of 10 percent year on year, EPS forecast to grow around 30 percent over the next three years, a billion dollars of net cash, and return on invested capital above 25 percent, all while the stock trades near a 52-week low on around 15 times forward earnings against a five-year historical average closer to 29 times.

The cause of this dislocation is sentiment, not substance.

— Investors Mutual Limited, Article, June 2026

Managers use the weakness to add

Ten Cap said it added to its ResMed position, describing a high-quality global franchise with structural demand drivers in sleep and respiratory care now trading at a more reasonable valuation after broader healthcare sector weakness, while Investors Mutual said it accumulated shares at what it considered reasonable prices during the same period. That buying came alongside a May quarterly result that beat expectations by 1 to 2 percent down the profit and loss statement, according to Pendal Group, with top-line growth of 8 percent translating to 21 percent earnings per share growth, mask sales outpacing flow generator sales on the back of successful fabric mask launches, and management continuing to expect medium-term gross margin expansion despite potential input cost pressure.

July's portfolio simplification

ResMed further sharpened its story in July, agreeing to sell its MatrixCare, Healthcare First and related residential care software assets to Frazier Healthcare Partners for US$490 million in cash. Pendal Group noted the divested assets contributed around US$220 million of revenue and US$55 million of operating profit, yet the market reacted positively, viewing the sale as removing a drag on growth and allowing management to refocus on higher-quality software assets such as Brightree. Pendal expects the simplified remaining software division to return to high-single-digit revenue growth, with the cash proceeds freeing up capital for buybacks, even as the deal creates some near-term earnings dilution.

What fund managers are watching next is whether the roughly 30 percent three-year EPS growth forecast holds up, whether fabric mask momentum keeps outpacing flow generators, how gross margins trend against input cost pressure, and whether real-world evidence on GLP-1 drugs continues to undercut the disruption narrative enough to close the gap between ResMed's current multiple and its historical average.