Fisher & Paykel Healthcare: A Breath of Fresh Air in Respiratory and Sleep Healthcare Markets

Fisher & Paykel Healthcare (NZX:FPH, ASX:FPH) has emerged as a leader in respiratory therapy and sleep healthcare markets, delivering robust financial results for fiscal year 2025 that underscore its position as a high-growth, undervalued stock. With record revenue, margin expansion, and a pipeline of innovative products, the company is poised to capitalize on secular trends in global healthcare demand. Here's why investors should take notice now.

Fiscal 2025 Results: A Testament to Execution

On May 28, 2025, Fisher & Paykel reported total operating revenue of $951.2 million NZD (approximately $447 million USD) for FY2025, a 18% year-over-year increase driven by strong performances in both its Hospital and Homecare segments. Net profit after tax surged 43% to $153.2 million NZD, outpacing guidance and reflecting improved operational efficiency and pricing power. The company's gross margin expanded to 61.9%, up 198 basis points in constant currency, as cost controls and higher-margin product sales took hold.

Growth Drivers: A Dual-Market Play

1. Respiratory Therapy Dominance in Hospitals:
   The Hospital Product Group reported a 21% revenue jump to $591.4 million NZD, fueled by rising demand for invasive and noninvasive ventilators, Optiflow nasal high-flow therapy systems, and new applications in anesthesia and critical care. With aging populations driving increased respiratory care needs, Fisher & Paykel's clinical solutions are becoming table stakes for hospitals worldwide.

2. Sleep Apnea Market Leadership:
   The Homecare segment grew 14% to $359.4 million NZD, led by sales of advanced sleep masks like the F&P Nova Micro and F&P Solo AutoFit. These products cater to the $14 billion global sleep therapy market, which is expanding as awareness of obstructive sleep apnea (OSA) grows. Fisher & Paykel's 12% R&D spend (up from 11% in FY2024) ensures it stays ahead in innovation, with plans to launch over 10 new products by 2026.

Valuation: Undervalued Amid Strong Fundamentals

• P/E Ratio: At 14.2x trailing twelve-month earnings, Fisher & Paykel trades at a discount to peers like ResMed (RMD) and Philips Healthcare (PHG), which trade at 22x and 18x, respectively. This gap reflects market skepticism about its growth trajectory—a mistake given its FY2025 results.
• Dividend Yield: Investors receive a 3% dividend yield (up from 2.9% in FY2024), with a sustainable payout ratio of 48% of net profit. The company's $110 million NZD in free cash flow provides ample room for reinvestment and shareholder returns.
• Currency Tailwinds: Over 70% of revenue comes from USD-denominated markets, and the company's NZD:USD 0.59 exchange rate assumption in FY2025 guidance was conservative. A stronger USD could supercharge 2026 results.

Risks? They're Manageable

• Regulatory Challenges: The Airvo 2 recall in 2024 highlighted risks in the medical device space, but Fisher & Paykel has since strengthened quality controls. No major recalls have occurred in FY2025.
• Competition: Rivals like Philips and ResMed are aggressive, but Fisher & Paykel's hospital-focused clinical solutions and premium homecare products create defensible niches.
• Currency Volatility: While exchange rates can impact margins, the company's global footprint and hedging strategies mitigate this risk.

Why Act Now?

• Underappreciated Growth: Analysts had projected FY2025 revenue of $1.9–2.0 billion NZD, and the company's results comfortably hit this range. With FY2026 guidance likely to be raised, the stock could see a rerating.
• Market Tailwinds: The $35 billion global respiratory care market is growing at 7% annually, while sleep therapy adoption rates are rising in emerging markets. Fisher & Paykel's 120-country reach positions it to capture this upside.
• Undervalued by Metrics: At 8.5x EV/EBITDA, the stock is cheap relative to its peers and growth profile. A move to 10x would add 18% to its valuation.

Final Take

Fisher & Paykel Healthcare is a buy at current levels, offering a rare combination of high growth, strong margins, and undervalued multiples in the healthcare sector. Its dual-market dominance, innovation pipeline, and shareholder-friendly policies make it a top pick for investors seeking exposure to secular healthcare trends. With FY2025 results exceeding expectations and FY2026 guidance likely to follow, there's no better time to breathe in this opportunity.