ResMed (ASX:RMD): Why Healthcare Shares Continue to Win Investor Confidence

April 28, 2025 12:49 PM AEST | By Team Kalkine Media

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Highlights

ResMed (RMD) operates a global healthcare business with expanding digital health capabilities.

Healthcare sector’s 'sticky' revenue offers resilience during economic downturns.

Growth and sustainability trends are boosting healthcare investments globally.

The healthcare sector has long been a beacon of stability, and ResMed (ASX:RMD) is a standout in this space. Despite the ResMed CDI share price being down 2.4% since the start of 2025, the company’s core strengths and the broader trends shaping healthcare make it a compelling business to watch closely.

Founded in Australia in 1989 by Peter Farrell, ResMed has evolved into a global healthcare giant headquartered in San Diego, California. The company specializes in cloud-connected medical devices, notably CPAP machines used to treat obstructive sleep apnea (OSA). ResMed operates two key business divisions: Sleep and Respiratory Care, and Software as a Service (SaaS), offering a combination of hardware and software solutions that are integrated into its digital health ecosystem. With over 10,000 employees and a presence in more than 140 countries, the company's global footprint is significant.

ResMed’s SaaS division also supports durable medical equipment (DME/HME) providers, helping to optimize care beyond hospital settings. By leveraging cloud-connected devices and data-driven insights, ResMed not only enhances patient outcomes but also contributes to lowering healthcare costs — a major advantage in today’s healthcare landscape.

When looking at the broader sector, the S&P/ASX 200 Healthcare Index (ASX:XHJ) has underperformed the general market over the past five years, with an annual return of -1.61% compared to the ASX 200's 8.12%. Yet, healthcare companies continue to attract attention due to their ‘sticky’ revenue nature. Healthcare services are considered essential, making them resilient even during economic downturns. Historical performance during the Global Financial Crisis reinforces healthcare’s reputation for stability.

Moreover, healthcare spending is on an upward trajectory. In the United States — which accounts for over 40% of global healthcare spending — expenditures are expected to rise by 7% annually from 2022 to 2027, reaching an estimated US$819 billion. Specific areas like healthcare IT and SaaS solutions are projected to grow revenue at more than 15% per year from 2024 to 2030, further boosting growth potential for companies like ResMed.

Ethical and sustainable investing is another tailwind. As more investors aim to align portfolios with sectors contributing positively to society, healthcare continues to emerge as a preferred choice. According to a recent survey, over half of investors are planning to increase their exposure to sustainable investments in 2024.

In terms of valuation, ResMed’s current price-to-sales ratio stands at 4.93x, notably below its five-year average of 8.70x. This reflects either a decline in the share price or growing sales — and in ResMed’s case, consistent revenue growth over the past three years underscores its business momentum.

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