ResMed Inc. (ASX: RMD) shares have fallen sharply.
On Tuesday, the medical device company's shares hit a 52-week low of $27.25 before closing at $27.66.
That leaves ResMed shares down around 39% from their 52-week high.
For a global healthcare business that is still growing, profitable, and exposed to a very large long-term market, I think that kind of pullback is worth a closer look.
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A much cheaper valuation
The first thing that stands out to me is the valuation.
According to CommSec, consensus estimates are for ResMed to generate earnings per share of $1.56 in FY26, $1.69 in FY27, and $1.83 in FY28.
Based on Tuesday's closing price, that means ResMed shares are trading on around 16 times estimated FY27 earnings.
I think that looks too cheap for a business of this quality.
This is not a company struggling to grow. ResMed's latest quarterly update showed revenue up 11% to US$1.43 billion, with non-GAAP diluted earnings per share up 21% to US$2.86. It also reported a non-GAAP gross margin of 62.8%, up 290 basis points on the prior corresponding period.
I do not think investors need to buy the stock because of one quarter. But I do think those numbers show the business is still performing well, despite what the share price performance might be suggesting.
The market opportunity is enormous
The bigger reason I like ResMed is the long-term opportunity.
Sleep apnoea remains a large and underpenetrated market. ResMed has previously pointed to more than 1 billion people with sleep apnoea globally, with less than 20% of obstructive sleep apnoea patients diagnosed or treated in the US and less than 10% in the rest of the world.
That is a huge gap.
If more people are diagnosed and treated over time, ResMed should have a long runway for growth across devices, masks, software, and connected health tools.
I also think the GLP-1 concern may be more complicated than the market sometimes assumes.
Weight loss drugs could reduce sleep apnoea severity for some patients. But ResMed's real-world data analysis suggests patients with an obstructive sleep apnoea diagnosis who were prescribed GLP-1 drugs were more likely to start PAP therapy and had higher PAP resupply rates.
In other words, greater attention on obesity and metabolic health may actually help bring more patients into the sleep health system.
What about the Noctrix acquisition?
One issue the market appears to be weighing up is ResMed's proposed acquisition of Noctrix.
I can understand the concern.
When a company with a strong core business buys into an adjacent area, investors sometimes worry that management is trying to offset slowing growth elsewhere.
But I do not see this as a sign that ResMed is plugging a hole in a sinking ship.
The Noctrix acquisition looks complementary to me.
Noctrix has an FDA De Novo classified device for refractory moderate-to-severe restless leg syndrome. ResMed says restless leg syndrome affects around 7% of adults globally and overlaps with obstructive sleep apnoea. The company also describes it as the next step in its focus on sleep health and adjacent total addressable market areas with unmet needs.
That makes sense to me.
ResMed is already a leader in sleep and breathing health. Expanding into a related sleep disorder seems like a logical extension of its existing strategy, especially if it can use its scale, clinical relationships, and digital health capabilities to support adoption.
Should you buy ResMed shares?
For me, the answer is yes, provided the investor is taking a long-term view.
ResMed shares may remain volatile. The market could stay focused on GLP-1 drugs, valuation questions, competition, or whether the Noctrix deal delivers the expected benefits.
But I think the current share price is offering a rare opportunity.
At only 16 times estimated FY27 earnings, investors are getting a high-quality healthcare business with strong margins, a net cash balance sheet, and a very large underpenetrated market.
