ResMed, the sleep-apnea device maker, is expected to keep growing earnings per share at a high-single-digit pace over the next three years, according to RBC Capital Markets. That forecast holds even if rival Philips Respironics returns to the US market in fiscal 2028, a scenario that has weighed on investor sentiment for some time.
In a recent note, RBC highlighted that ResMed's share repurchase plans could become the main engine of per-share earnings growth. The company has signaled a large buyback program starting in fiscal 2027, and RBC estimates that ResMed's free cash flow—the cash left after running the business and investing in it—could support roughly $1.5 billion of buybacks annually through fiscal 2031.
Why buybacks matter for EPS
Earnings per share is a key metric that investors use to gauge a company's profitability. It's calculated by dividing net income by the number of outstanding shares. When a company buys back its own stock, it reduces the share count, which boosts EPS even if total profits stay flat. That's why buybacks are often seen as a way to return cash to shareholders and support the stock price.
For ResMed, the buyback program could be especially important if the competitive landscape shifts. Philips Respironics, a major competitor, has been largely absent from the US market due to a massive recall of its sleep devices. That vacuum has helped ResMed gain market share. But if Philips returns, ResMed could face renewed pricing pressure and slower revenue growth. In that scenario, buybacks would help maintain EPS growth even if the top line softens.
RBC's view suggests that investors should focus less on the next quarterly device sales number and more on the company's ability to generate cash and return it to shareholders. This is a common theme across many mature companies: when growth slows, capital returns become a bigger part of the investment case.
What it means for investors
For everyday investors, the key takeaway is that ResMed's earnings growth may come more from financial engineering than from operational expansion. That's not necessarily a bad thing—buybacks can be a sign of a healthy, cash-generative business. But it's important to understand that EPS growth driven by buybacks is different from growth driven by higher sales or wider margins.
Investors should also watch how ResMed balances buybacks with other uses of cash, such as research and development or potential acquisitions. The company has a strong track record of innovation in sleep and respiratory care, and maintaining that edge will be crucial if competition intensifies.
RBC's forecast of high-single-digit EPS growth is a solid, if not spectacular, expectation. It implies that ResMed can continue to reward shareholders even in a tougher market. For those who own the stock, the buyback program provides a floor of support. For those considering an investment, it's worth weighing the company's cash generation against the risks of a Philips comeback.
As always, no single analyst forecast is a guarantee. But RBC's analysis underscores a broader point: in a mature industry, returning cash to shareholders can be just as important as growing the business. ResMed appears to be doing both, and that could be enough to keep the stock attractive over the next few years.
