Stock Analysis | ResMed Outlook - Mixed Technicals, Strong Fundamentals, and Earnings in Focus

Market Snapshot: Rising on Sector Optimism, But Technicals Signal Caution

ResMed (RMD) has risen by 8.99% in recent sessions, aligning with broader optimism in the healthcare sector and expectations of a Federal Reserve rate cut. However, our internal diagnostic score (0-10) for technical analysis is 4.8, indicating a weak technical outlook and the need for caution ahead.

News Highlights: Sector-Wide Optimism and Regulatory Shifts

Recent news highlights a mix of sector-wide optimism and regulatory shifts that could impact ResMed:

• Healthcare stocks rise on rate cut hopes – A recent article notes that healthcare stocks, including ResMed, are rising on expectations of a rate cut, which could lower borrowing costs and boost valuations. This is a positive macro-level signal.
• Medicare price negotiations delayed – New provisions in the One Big Beautiful Bill Act will delay Medicare price negotiations for some top-selling drugs and devices. This could provide ResMed with more pricing flexibility and reduce regulatory pressure in the short term.
• Sector earnings mixed, but some companies like Humana have outperformed – While the broader sector has seen mixed earnings, some companies, such as Humana, have raised revenue forecasts. This suggests that healthcare stocks are reacting to both earnings and broader macroeconomic expectations.

Analyst Views & Fundamentals: Stronger Than Average, But With Some Disagreement

Analysts remain generally optimistic about ResMed, with a simple average rating score of 3.88 and a performance-weighted rating score of 4.80. However, there is some dispersion in views, with the recent ratings split into "Strong Buy," "Buy," and "Neutral."

Key fundamental factors show strong performance, as reflected in the internal diagnostic score of 7.75 for fundamentals:

• Net profit margin (NPM): 26.88% – ResMed is maintaining strong profitability, with a high net profit margin.
• ROE (Return on Equity): 6.56% – The company is generating a modest return on equity, which is in line with industry norms.
• Net cash flow from operating activities per share (YoY growth rate): 13.60% – ResMed is showing solid growth in cash flow from operations, indicating strong operational efficiency.
• Net cash flow from operating activities / Operating revenue: 25.30% – This suggests that a large portion of the company’s revenue is being converted into cash, which is a positive sign for liquidity and financial health.

While fundamentals are strong, the technical outlook is weaker (4.8), and the recent price trend (8.99% rise) appears to be outpacing the bearish technical signals. Investors should monitor for any divergence between fundamentals and price action in the near term.

Money-Flow Trends: Strong Institutional and Retail Inflows

ResMed has seen strong money-flow across all investor categories, with a fund-flow score of 8.06 and an overall inflow ratio of 51.71%. This indicates that both institutional and retail investors are showing confidence in the stock:

• Large institutional inflows (51.26%) – Large and extra-large investors are showing strong interest, suggesting that the stock is being added to portfolios in significant volumes.
• Positive retail inflows (50.39%) – Retail investors are also participating, which can sometimes indicate a short-term pop in sentiment or retail-driven momentum.

The positive flow across all categories reinforces the recent price rise and suggests that the stock is attracting attention from both long-term and short-term investors.

Key Technical Signals: Mixed Indicators and a Bearish Earnings Date

Recent technical indicators for ResMed are mixed, with both bullish and bearish signals emerging in the past five days:

• RSI Overbought (score: 7.87) – This suggests that the stock is trading at overbought levels, which may lead to short-term volatility or a pullback.
• WR Overbought (score: 6.24) – Another indicator of overbought conditions, though with a slightly weaker internal diagnostic score.
• Earnings Release Date (score: 1.00) – A strong bearish signal, as historical data shows an average return of -3.93% and a win rate of just 33.33% after such events.
• Hanging Man (score: 4.08) – A bearish candlestick pattern that historically has had a 50% win rate and a 43% average return.

On August 1, both the WR Overbought and Hanging Man patterns were observed, suggesting a potential reversal. The RSI Overbought signal was also present earlier in the week. Investors should closely watch the upcoming earnings release on August 4, which is expected to be a key driver of short-term volatility.

Conclusion: Strong Fundamentals, But Technicals and Earnings Pose Risks

ResMed is showing strong fundamentals and positive money flows, but the technical outlook is weaker, and the upcoming earnings release could introduce volatility. Our internal diagnostic scores suggest a cautious approach:

• Technical analysis score: 4.8 – Weak technicals, suggesting the stock may face resistance in the near term.
• Analyst ratings: 3.88 (simple average), 4.80 (weighted) – Generally positive but with some dispersion in views.
• Money-flow score: 8.06 – Strong inflows from both institutional and retail investors.

Actionable takeaway: Consider waiting for a pull-back after the earnings release on August 4 before entering long positions. If the stock confirms a bearish reversal pattern post-earnings, it could provide a more favorable entry point for value-driven investors.