August is almost here, and if I could buy only one ASX share for the month, ResMed Inc. (ASX: RMD) would be it.
I have covered the sleep health leader plenty of times, but the size of the opportunity still surprises me.
Here is why ResMed remains my highest-conviction pick.
Image source: Getty Images
The market is still barely penetrated
ResMed is often described as a maker of sleep apnoea devices and masks. That is accurate, but it understates the opportunity.
The company estimates that more than 1 billion people worldwide live with sleep apnoea. Yet fewer than 20% of patients in the United States and fewer than 10% across the rest of the world are diagnosed or treated.
That leaves an enormous gap between the number of people who could benefit from treatment and the number currently receiving it.
ResMed expects the number of US adults with obstructive sleep apnoea to reach around 77 million by 2050, roughly 35% above 2020 levels.
Ageing populations, higher average body mass indexes, and rising prevalence among women could all contribute.
I think ResMed can grow for years simply by helping more people move from poor sleep and an undiagnosed condition into treatment.
More than an initial device sale
The economics become even more attractive after a patient begins therapy.
A device may stay in use for years, while masks and other components need regular replacement. ResMed expects the global device market to grow at a mid-single-digit rate and the mask market at a high-single-digit rate.
I particularly like the mask opportunity because it creates repeat demand and recurring revenue from a growing installed base.
ResMed also has connected technology that helps patients and healthcare providers monitor therapy. Better engagement can improve adherence and keep the company involved throughout the treatment journey.
This is why I see ResMed as a sleep health platform rather than a business relying on one product sale.
A new move into restless legs syndrome
ResMed is widening that platform through Noctrix and its Nidra therapy for refractory moderate-to-severe restless legs syndrome (RLS).
RLS affects around 7% of adults globally and is the third most common sleep disorder after sleep apnoea and insomnia. ResMed estimates an addressable population of around 17 million US adults, including approximately 1.7 million with refractory moderate-to-severe RLS.
I think this is a logical area for the ASX share to enter. It already understands sleep medicine, works with many relevant clinicians, and knows how to bring connected home-based therapy to patients.
Noctrix is expected to contribute around US$30 million of revenue in FY27 while reducing earnings per share slightly as it invests in growth.
I am comfortable with that near-term cost. I like that the company is using its financial strength to build another meaningful sleep health business.
Foolish takeaway
My conviction on this ASX share comes from looking beyond the next result. Most potential patients remain untreated, recurring mask demand can grow faster than devices, and adjacent sleep disorders create new paths forward.
I think the share market can still underestimate how much larger ResMed may become.
With August almost here, and its shares down around 33% from their high, I think now is a great time to invest.
