DCF Studio

    RMD.AX · ASX · Healthcare

    ResMed Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 26.15

    Market price

    AUD 31.87

    Implied upside

    -17.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.4042

    AdjustedReports in USD, trades in AUD. Modelled in USD, converted at the end.

    Current EV/EBITDA of 21.1x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    AUD 26.15-17.9%
    Exit multiple
    AUD 48.55+52.3%
    Market price
    AUD 31.87

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 6.2bnUSD 6.9bnUSD 7.6bnUSD 8.3bnUSD 9.2bn+10.2%
    EBITUSD 1.9bnUSD 2.1bnUSD 2.3bnUSD 2.6bnUSD 2.8bn+10.2%
    NOPATUSD 1.6bnUSD 1.7bnUSD 1.9bnUSD 2.1bnUSD 2.3bn+10.2%
    Add depreciation & amortisationUSD 283.4mUSD 312.3mUSD 344.2mUSD 379.4mUSD 418.1m+10.2%
    Less capital expenditureUSD -166.9mUSD -183.9mUSD -202.7mUSD -223.4mUSD -246.2m+10.2%
    Less increase in working capitalUSD 21.0mUSD 23.1mUSD 25.5mUSD 28.1mUSD 30.9m-10.2%
    Free cashflow to firmUSD 1.7bnUSD 1.9bnUSD 2.1bnUSD 2.3bnUSD 2.5bn+10.2%
    Discount factor0.95200.86290.78210.70890.6425-
    Present valueUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bn-0.1%
    Present Value Of The ForecastUSD 8.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.843Reported 0.766, pulled toward 1.0 (Blume)
    Cost of equity10.41%Risk-free + beta x equity risk premium
    Cost of debt7.35%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 46.0bn98.2% of capital
    Total debtUSD 825.9m1.8% of capital, book value as a proxy
    Tax rate18.9%Effective, capped at statutory
    WACC10.33%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 18.62

    70% of EV

    Forecast FCFF, final year
    USD 2.5bn
    Capex at depreciation, working capital in reinvestment
    USD 2.5bn
    Less reinvestment at g/ROIC (12.3% of NOPAT)
    USD -307.7m
    Capitalised
    USD 2.2bn
    ROIC (reported)
    20.4%
    Terminal value, undiscounted
    USD 28.8bn
    Terminal value, discounted
    USD 18.5bn
    Enterprise value
    USD 26.6bn
    Less net debt
    USD -643.3m
    Equity value
    USD 27.2bn

    Exit at 20.0x EBITDA

    Value per shareUSD 34.57

    84% of EV

    Terminal value, undiscounted
    USD 65.1bn
    Terminal value, discounted
    USD 41.8bn
    Enterprise value
    USD 49.9bn
    Less net debt
    USD -643.3m
    Equity value
    USD 50.5bn

    Spread between methods: 60%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.33%22.7123.6224.6925.9527.47
    9.33%19.8820.5121.2122.0322.98
    10.33%17.7018.1418.6219.1719.80
    11.33%15.9616.2816.6217.0017.43
    12.33%14.5514.7715.0215.2915.59

    Outlined: this model. Green text: above today's price of 22.70. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year10.2%15.3%+5.1pp
    EBIT margin30.8%38.4%+7.5pp
    Discount rate10.3%8.9%-1.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.