Stocks In Focus: ResMed, March 18 2026

0:02Ryan Newman:A listener production. Shares. Markets. The S &P. The OSEC. Stocks. Motley Fool Money. Stocks in Focus.

0:10Scott:G'day fools and welcome back to Motley Fool Stocks in Focus. We've had a little bit of a hiatus over the past few weeks. Earnings season got in the way. Things got busy but we are back. Hopefully regularly now from now on weekly in both podcast and YouTube form. This is the one piece of content we do. We publish the audio on the Motley Fool Money podcast feed. If you're not yet subscribed to that, go and check that out. And we publish it on YouTube. And if you're listening to this on Motley Fool Money, thank you. Go and check out the YouTube channel, Motley Fool Money. Just search for that. It's the one we do with listener.

0:41Scott:There's an American Motley Fool Money, so choose the right one. But subscribe to that on any podcast player. And as I said, jump onto YouTube. It's simply just youtube.com forward slash fool AU. We do Stocks in Focus, Stock of the Month, Motley Fool TV, what I've been reading, lots of cool stuff. So yeah, more coming. If you're not yet visiting and subscribed to that, do me a favor. And look, here's the usual YouTube thing. If you are watching this on the video right now, hit the subscribe and notification buttons for me. Hit the like button if you don't mind. It helps other people find the content and makes us feel good.

1:08Scott:So that's always a nice benefit as well. I say us. The us is rotating. It's always me or almost always me. But this time, I'm very fortunate to be joined by our Director of Research, Ryan Newman. Ryan, oh, g'day. G'day, Scott. Thanks for having me. Pleasure, mate. Thanks for being here. Stocks in Focus is where we take apart a company that people are widely known, widely owned, talked about in the news, whatever those things are. And I suspect today's company, ResMed, RMD is the ASX code, probably fits most of those relatively widely owned, relatively well known, certainly in the news. And I'm sure we'll talk about a little bit about why in a second.

1:44Scott:Before you get into any of that though, mate, let's start as we always do. Tell me about ResMed, the company. What is it? What does it do?

1:51Ryan Newman:It's a company that's pretty well known, I think, among Australian investors, not only because it's been around for decades, but also because I suspect there are a lot of people who actually also use its solutions. And specifically, it develops medical devices and also increasingly software as well. But the medical devices specifically, predominantly treating conditions like sleep apnea and other respiratory conditions. And of course, I guess the conditions that it treats or the conditions that its products can actually help extend far beyond just sleep apnea. We know that affected sleep, sleep apnea specifically can affect a lot of other conditions within the human body, whether that be the heart, breathing health, sleep health, focus during the day, therefore work outcomes as well.

2:36Ryan Newman:So there's far reaching outcomes that ResMed really aims to treat and to remedy. So it is best known for its CPAP machines. I suppose in a way you could almost say it's a razor and blade model in the sense that it really sells the razor, which is the CPAP machine itself to begin with. It doesn't make a huge margin on that, but it does make some money on that nonetheless. In addition, though, it does sell also accessories such as masks and all those sort of things that do create more margin at the back end. And what I find fascinating as well is that there have been some challenges to, I suppose, the technology that it uses in recent years.

3:17Ryan Newman:And we'll get to that in a moment. But what I find really interesting is the data that it's got at its back and the data that it could actually use to support it going forward, that actually seems to be really helping it to propel sales in the future as well. So that's something that I really like about the business. But as I said, Scott, it is operating in the medical space, the medical technology space. It's a pretty defensive model, even in terms of recessions, inflation. The products that it sells, its customers can't really do without. Now, what I do really like about ResMed, and I think this is really worth highlighting here, is they do really look after the customer.

3:54Ryan Newman:They're not out there to price gouge the customer in times of inflation. They're not out there just to take advantage, but they do have the ability to pass on costs, the additional costs where necessary. And I think that's a really important factor here, that it has that defensive ability, but also the willingness and the capacity to look after its customer base. And I think that's a really important facet. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

4:27Scott:So we are going to talk about the pros and cons. We've done a couple of pros already. Maybe you can kind of flesh that out a little bit. This is not going to be a formal recommendation, by the way. So what we're going to do is highlight the pros and the cons. I will hold Ryan's feet to the fire and ask him to tell me whether he thinks it's likely to beat the market over the next five years, but not as a formal recommendation, listening in this context, in this space. Let's do that, though, mate. The pros of an investment specifically in ResMed.

4:50Ryan Newman:Scott, just a little teaser before we go on. I've often sat on the fence with those questions. Is it likely to be a market better? I promise you, I will not sit on the fence with this one. I'll give you a definitive answer. Good, good. We look forward to that. In terms of the pros, I'll flesh those out a little bit. As you said, there's really some strong tailwinds at these companies back. And specifically, we know that we have an aging population. And that's not just the case here. That's the case in many other markets and many other developed markets as well. We also have a market or I guess a demographic that unfortunately is becoming increasingly prone to many health conditions, whether that be heart issues, risk of stroke, burnout at work, I guess a very rapid pace of life, I think can also create a lot of stress, which can also lead to breathing conditions and affected sleep.

5:45Ryan Newman:So there's some really strong tailwinds at its back. But I guess even more so than just those health conditions and the demographic conditions, I think there's also a number of other technological tailwinds at its back as well. And one of these is probably a little bit ironic because it was only a couple of years ago that this was seen as a major, major risk to ResMed's business. And specifically, that was the GLP-1 drug. So think Ozempic and other weight loss drugs. The, I guess, short story here is, at the time, people were terrified that JLP1 drugs like Ozympic would lead to lower rates of obesity, which would lead to less cases of sleep apnea, which would therefore lead to less demand for ResMed's devices.

6:32Ryan Newman:Now, I think that is a viable concern. It certainly was at the time. However, I think at the time, the company has really proven that to be the wrong way to look at this. And of course, things can change. And that is something that we will continue to watch and investors should continue to watch over time. But ultimately, what the company is finding is that the patients who are on these GLP-1 drugs are actually those who have tended to be more proactive about their health. And they're actually looking for ways to be healthier. And when paired with GLP-1 drugs, when paired with ResMed's own treatments like CPAP, they actually get better results, not only for the patient, but also financially.

7:15Ryan Newman:They're finding that those sort of patients are coming back for more masks, more accessories. They're a more reliable customer base. So at the end of the day, this has actually become quite a tailwind for the business. The other tailwind as well that I'll touch on here is the use of wearable devices. And I'm wearing one right now, the Apple Watch. I'm wearing an older model, I must say, but a lot of the newer models, and not only from Apple, but also from Samsung and the like, these smart devices do have the capability to track sleep health, sleep quality. And these are the sort of things that can actually send alerts to the client or to the patient or to the potential client and say, your quality of sleep is lacking here.

7:57Ryan Newman:Your breathing is affected, maybe seek treatment. It's also creating more abilities and more capabilities for health experts and sleep experts to actually monitor those patients and I guess bring more of that treatment into the home. And I think there's a really big opportunity for ResVed. I'll touch on a couple of others. Recurring revenue model, as I said, it sort of has that razor and blade model, sells the device initially and then sells accessories ongoing before potentially selling another device maybe four or five years later. And also a very high quality financial profile. This company is consistently bringing in high single digits, if not low single digit growth.

8:38Ryan Newman:Scott, as you said, there are some cons as well. And I touched on one a moment ago. The major one I would say is the risk of technological obsolescence, I suppose. Now, we've seen JLP1 drug was a threat and it's now become an opportunity. That doesn't mean it necessarily will always be that opportunity. It could also reverse and become a threat. So I think that is worth watching. And of course, the risk of AI. AI can't be attached to a person's lungs and help them breathe necessarily, but AI could potentially help to accelerate the finding of another viable solution, potentially one that's even superior to CPAP or GLP-1 drugs.

9:21Ryan Newman:And I think that's something that we really do need to monitor going forward. I think in this day and age, there is nothing that isn't completely safe from AI. And that's something that we do need to watch out for.

9:33Scott:Nice, mate. By the way, if you are watching this on YouTube, you must be fidgeting around. I have a six-month-old dog. He's literally grabbing at my sleeve. So I'm trying to be very, very professional here. He's actually... Look, why not? Hey, here's the dog. I think you said you've got some stormed in your area. So no wonder. Oh, mate, seriously. Yeah. If you're watching this on YouTube, you're welcome. If you're not, if you're on the podcast listening to this, check out YouTube. You'll see me fidget trying to stay still. Listen to Ryan talk about a very important company while the dog is giving me absolute grief.

9:59Scott:And because we're keeping it real, we're not going to pause it. We're going to push through while I deal with the dog. Mates, so you've given us the pros and the cons. You promised us a definitive answer. So I'm going to... I think I know which way you're going to go. But let's give our listeners and viewers a treat. ResMed, do you reckon over the next five years it's a market beater or do you think it's going to lag the ASX?

10:19Ryan Newman:Scott, I promised I wasn't going to sit on the fence with this one, and I'm not. I do believe this one is a market beater. I really like this company. As I said, it's got a very defensive business model. It's quite protected from recessionary pressure. It's also quite protected from inflation. I love the customer-first approach that it takes. As I said, it could theoretically flex its muscles and say, hey, no, we have the ability to charge more. We're going to. But no, it takes that long-term view. And that's something that we at The Fool are obviously very passionate about as well. We too take that long-term view.

10:58Ryan Newman:In terms of looking after the patient, in terms of if you look after the patient, the patient will often look after you as well. And I think that's a really important thing. But as I said, the tailwinds that these companies back are also very, very strong. And it's just proven its ability time and time again to deliver the goods in terms of, yeah, even through COVID. when there were massive supply chain issues, it found a way to continue looking after those patients to continue delivering strong results for investors as well. I have no doubt that the company can continue to do that from here as well.

11:32Ryan Newman:As I said, it's not going to be an extreme growth company. I mentioned a moment ago, I think that typically delivering high single digits to low double digit growth year in, year out. The law of live numbers, it will eventually get to the point where it can't continue to sustain those growth rates. But with the tailwinds at its back, I do think it can do that for quite a period of time yet.

11:55Scott:There you go. At least for five years, according to Ryan Newman, he reckons it might be a market beater. So you've heard it here first from Ryan and from me and from Diesel, who's still giving you grief. Until next week, thanks for listening. Thanks for watching us on YouTube. I'll get rid of the dog next time. Until then, full on. Full on.

12:11Ryan Newman:The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.