Regulatory Overhaul Implies 30% Downside For ResMed Stock

Short interest in ResMed Inc. (NYSE:RMD) is at its highest point this year, signaling that investors are growing increasingly bearish on the company’s valuation and are betting on a decline in the price per share. This marks the biggest bet bears have made against the company since ResMed traded at a new 52-week high last July. Shares of the company then slid more than 27%, marking a 52-week low, just four weeks later (as depicted, below).

Top-Line Growth

Insider stock sales dually suggest the market may have topped, with board members and members of management selling 1.31MM shares in aggregate in the last 12 months -predominately in the low to mid-$30 range.

Notwithstanding, ResMed trades at a sharp premium to valuations underscoring mature mid-tier medical technology companies. Valued at 20X trailing twelve month earnings versus 12X trailing EPS typical in their segment implies that investors are expecting sharp growth. Analysts and industry experts, however, are suggesting the opposite.