Red Flag Alert – Underappreciated Risk for ResMed
What may keep the CPAP maker's investors up at night.
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Sometimes in this market, you can’t move fast enough…
That’s why I increasingly try to keep premium subscribers in the loop on ideas on my list, which was the case on February 28, when I mentioned I was working on CPAP-maker ResMed RMD 0.00%↑. Since then, the stock has slid 8% – double the market – in the process shaving off what, at the time, appeared to be a stock with at least 30% risk.
In other words, perfect for Red Flag Alerts.
And even with the stock’s decline, the risk remains… and as I explain in this report, it’s likely underappreciated and underestimated.
Special thanks to FinTool, Tenzing MEMO, and Fiscal.ai, whose tools were used as part of this research.
Quick Background…
I’ve been doing this long enough to have seen more than enough short-sellers get steamrolled by seemingly obvious ideas…
Among them is ResMed, which is just down the road from me here in San Diego. Over all of these years, for some unknown reason, there was never enough there to excite me enough to dig deeper when I would hear the bearish bent. As a result, it never made the grade for a bona fide red flag or for a full-fledged report.
Or, you might say, I dodged a bullet, with the stock rising more than 700% over the past 10 years.
So, why now?
Because even with its stock roughly 20% off last year’s record high, including the more recent step-down, shares are priced as if there is no risk and current growth, as sleepy as it is, will continue.
Let Me Explain…
But before I do, here’s the bull case via my friends at Tenzing MEMO…
ResMed dominates the massive, underdiagnosed sleep apnea market with best-in-class CPAP devices and masks, serving over 30 million cloud-connected patients globally. The company's moat stems from superior product innovation, regulatory expertise, and sticky customer relationships in a market where less than 20% of sufferers are diagnosed. With aging demographics driving structural growth, expanding breathing health adjacencies like COPD treatment, and a profitable software platform supporting residential care providers, ResMed offers compelling long-term growth. The business generates exceptional cash flows—$1.75 billion in fiscal 2025—while maintaining strong margins and returning capital through dividends and buybacks. Recent FDA approval of GLP-1 drugs for sleep apnea validates the market's importance rather than threatening it.
Sounds good on paper, except it’s not that simple.