ResMed Inc (ASX: RMD) shares have fallen by more than 25% over the past year, which begs the question: Is now the time to buy in?
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ResMed shares looking cheap according to analysts
The analyst team at Morgans has run the ruler over the company, and has a buy recommendation on the stock and a bullish share price target, which we'll get to shortly.
The reason the Morgans team had another look at ResMed was because of the company's recent move to sell its MatrixCare division for US$490 million, with that sale expected to be completed in the first quarter of FY27.
ResMed said the sale would allow it to focus more strongly on its core business.
As it said:
This move reflects Resmed's 2030 strategy by focusing on high-growth, scalable opportunities in sleep health, breathing health and connected home-based healthcare. The divestiture also strengthens Resmed's ability to reallocate capital and resources toward innovation, operational scale and long-term value creation across its connected, home-based care ecosystem.
MatrixCare is a software business focused on "nursing, senior living and long-term care, life planning communities, and home health and hospice care''.
The Morgans team said they believed the transaction made sense as it would simplify the ResMed business.
They added:
Importantly, net proceeds will largely be returned to shareholders via an accelerated share repurchase (ASR), which should substantially offset earnings dilution from both the MatrixCare disposal and the recently completed Noctrix acquisition, while FY26 guidance has been reaffirmed.
Morgans said MatrixCare, which ResMed acquired for US$750 million in 2018, had been a disappointing acquisition for the company.
Morgans said:
During this time, earnings increased from ~US$30m to ~US$55m, implying modest long-term earnings growth. While this reflects poorly on the original acquisition, we believe exiting today is preferable to continuing to allocate capital toward a mature business with limited strategic alignment.
ResMed target price has been reduced
Overall, Morgans remains positive on ResMed's outlook; however, they slightly reduced their price target to $41.72.
As they said:
We view RMD's fundamentals as sound, with consistent execution, strong cash generation and structural growth tailwinds from expanding diagnosis and resupply. We have a BUY rating with a sum of the parts/discounted cash flow target price of $40.97.
ResMed shares were changing hands for $28.25 on Thursday.
The company is valued at $40.06 billion and pays an unfranked 1.23% dividend yield.
ResMed will report its fourth quarter earnings on 6 August.
