The ResMed Inc. (ASX: RMD) share price is trading around $31.62 on Tuesday.
At that price, I think the sleep treatment company is starting to look cheap given the earnings growth expected over the next few years.
Here is why.
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The earnings growth catches my attention
I think ResMed has a bright outlook that makes it worth considering today.
The company generated earnings per share (EPS) of $1.54 in FY26.
Consensus forecasts point to EPS increasing to $1.69 in FY27, $1.85 in FY28, and $2.02 in FY29.
That works out to annual earnings growth of roughly 9% to 10% across each of the next three years.
I think that is a very healthy pace for a business of ResMed's size.
It means that at $31.62, the ResMed share price is trading on a PE ratio of roughly 18.7 times forecast FY27 earnings. That falls to around 17 times FY28 earnings and less than 16 times the FY29 estimate.
For a global healthcare company expected to compound earnings at close to double-digit rates, those numbers look quite reasonable to me.
Plenty of room to keep growing
The valuation is only attractive if the business has somewhere to go from here. I think ResMed does.
Sleep apnoea is a major global health problem with an estimated 1 billion+ sufferers, and a significant number of them remain undiagnosed or untreated.
That gives ResMed a substantial market opportunity as awareness improves and more patients enter the healthcare system.
The company is already one of the global leaders in sleep and respiratory care, with its devices helping patients manage obstructive sleep apnoea and other conditions.
That position means ResMed does not need to create an entirely new market. It can continue growing as diagnosis rates increase and treatment reaches a larger proportion of the people who could benefit from it.
I also think broader health trends support the long-term opportunity. Ageing populations and rising obesity rates can contribute to the prevalence of sleep apnoea, potentially increasing the number of people who require treatment over time.
So, is the ResMed share price cheap?
I think it is a cheap buy. A forward PE ratio below 19 times does not strike me as demanding when analysts expect earnings to grow at roughly 9% to 10% a year.
If ResMed reaches the FY29 EPS forecast of $2.02, today's price would represent less than 16 times those earnings.
Of course, forecasts can change, and healthcare companies still need to execute well to turn market opportunity into earnings.
But at the current price, I think investors are getting a compelling risk/reward ratio.
Foolish takeaway
At $31.62, I think the ResMed share price looks cheap for the growth on offer.
With earnings expected to keep rising and the company still facing a large global market opportunity, I would be happy buying at current levels and holding for the long term.
