Finding a quality ASX healthcare stock at a discount has been difficult over the past few years.
ResMed Inc (ASX: RMD) may be the exception right now.
The sleep health giant has been sold down hard over the past twelve months. The market's problem with ResMed is not what the company has been reporting, but what it fears is coming for future ResMed earnings.
The company's shares changed hands around $28.77 in late July, down roughly 30% from a year earlier.
On forward earnings, that leaves this ASX healthcare stock at its cheapest multiple in more than a decade.
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Recent earnings: the business keeps growing
The de-rating has not come from the numbers.
ResMed reported its third-quarter FY26 results on 30 April. In those results, revenue rose 11% to US$1.43 billion, or 8% on a constant currency basis. Gross margin expanded 290 basis points to 62.2%, helped by component cost improvements and manufacturing efficiencies. Income from operations increased 17%, and non-GAAP diluted earnings per share climbed 21% to US$2.86.
The board declared a quarterly dividend of US$0.60 per share and repurchased roughly US$175 million of stock during the quarter.
Fourth-quarter and full-year FY26 results are due on 6 August, which makes the next fortnight an important one for this ASX healthcare share.
Why the market de-rated this ASX healthcare stock
Two anxieties explain most of the selling.
The first is the rise of GLP-1 weight loss drugs and the fear they will eventually shrink the pool of sleep apnoea patients.
The second is a broader healthcare sector rout, which intensified after the United States announced fresh tariffs on 60 trading partners.
There are more specific worries too.
Positive Phase III data from Apnimed's oral obstructive sleep apnoea therapy raises the prospect of a pharmaceutical alternative to a device.
Philips is also expected to re-enter the US PAP market from 2027, which would restore a competitor ResMed has not faced at full strength for years.
These news items are concerning, but current industry data and ResMed's own operating performance show little evidence of a material deterioration in underlying demand, which is the crux of the bull case.
Morgans is unconvinced by the bear case and has a buy rating with a $41.72 price target on the stock.
The broker wrote:
RMD has de-rated to ~16x forward earnings, its lowest valuation since the post-GFC period, despite consensus continuing to forecast double-digit EPS growth.
What the numbers say about this ASX healthcare stock
Consensus earnings per share estimates on CommSec sit at $1.57 in FY26, $1.69 in FY27 and $1.84 in FY28.
At the recent share price, that implies roughly 18 times FY26 earnings and 17 times FY27.
Those multiples are quite modest for a business compounding earnings at a double-digit rate. ResMed also returns capital consistently, having lifted its quarterly dividend and repurchased stock in each of the past several quarters.
The catch is that cheap can stay cheap for a long time, and sentiment will not turn on valuation alone.
Instead, sentiment will turn on evidence that the underlying demand can remain robust.
Foolish takeaway
ResMed is in no way a broken business. The company is a profitable global leader growing revenue at double digits while expanding margins.
What has changed is the market's willingness to pay a premium for that growth.
That may prove to be an overreaction, or it may prove to be an accurate read on a genuine structural threat.
However, it is clear that for investors with a multi-year horizon, this ASX healthcare stock looks considerably more interesting than it did eighteen months ago.
