Goldman Sachs: Australian Medtech Sector Poised for Dual Valuation and Earnings Recovery Alongside U.S. Peers

Overview

This report analyzes the performance and future catalysts of the Australian Securities Exchange (ASX) medical devices sector from a top-down perspective. Goldman Sachs notes that while investors often focus on company-specific drivers, the ASX medtech sector’s weakness this year closely tracks that of large U.S. medtech peers—down ~20% year-to-date—due to U.S. payer policy changes causing lower utilization and China-related sales headwinds. The report argues that assessing ASX medtech prospects requires considering both earnings trajectories and broader industry sentiment. Based on historical reversal catalysts—including new product cycles, M&A activity, and share repurchase programs—Goldman Sachs maintains Buy ratings on ResMed (RMD), Fisher & Paykel Healthcare (FPH), and Nanosonics (NAN), while retaining a Neutral rating on Cochlear (COH).

Core views

Industry Context and Macro Linkage: The ASX medtech sector’s weakness is not an isolated event. Large U.S. medtech stocks have declined ~20% year-to-date, driven by managed care reforms in the U.S., Medicaid cuts reducing procedure utilization, and China-related sales drag. Goldman Sachs’ U.S. team believes these headwinds remain underpriced in 2026 guidance. Looking back at the prior cycle (excluding pandemic effects), organic growth deceleration persisted for roughly three years (2010–2013). Currently, the sector’s P/E has contracted ~500 bps versus 2025 levels and ~700 bps below its 20-year average, standing at ~19x—compared to the prior cycle trough of ~11x. Reversal Catalysts and Stock-Specific Views: Historically, medtech sector reversals have been driven by new product launches/M&A and increased share repurchase activity. ResMed (RMD) stands on the cusp of new product launches and has expanded its product portfolio via the Noctrix acquisition, while retaining ~US$700 million in remaining buyback capacity. Fisher & Paykel Healthcare (FPH) has several products awaiting FDA approval for launch, and following its recent dividend increase, further capital management actions are anticipated. Nanosonics (NAN) faces a time lag in CORIS system adoption to offset slowing Trophon upgrade demand, yet its innovation fund portfolio offers optionality. In contrast, Cochlear (COH) contends with market share erosion, supply chain constraints, and surgical capacity limitations. Although Apple’s AirPods Pro 2 launch may raise hearing loss awareness and indirectly support referral volumes, Goldman Sachs retains a Neutral stance. Valuation Methodology: Goldman Sachs employs a hybrid valuation approach across covered companies. For example, COH is valued using 50% DCF and 50% EV/EBIT, yielding a target price of A$130.80; NAN uses a Sum-of-the-Parts (SOTP) framework, separately valuing the Trophon and CORIS businesses, resulting in a target price of A$4.50; FPH and RMD are similarly valued using blended DCF and relative valuation methods, with target prices of A$42.30 and A$46.20, respectively.

Analysis framework

Goldman Sachs’ analytical framework follows a top-down logic. First, it establishes correlation between ASX medtech stocks and large U.S. medtech peers, demonstrating that ASX underperformance reflects a global cyclical slowdown—not idiosyncratic company fundamentals. Second, drawing lessons from prior cycles (especially 2010–2013), it identifies core reversal drivers: reanchoring of earnings expectations, proactive capital returns (buybacks/dividends), and new growth catalysts (product launches/M&A). Finally, these macro- and industry-level insights are applied to individual companies to assess their relative positioning across product pipelines, capital allocation strategies, and competitive dynamics—yielding differentiated rating recommendations. This methodology emphasizes integrating sector beta with company-specific alpha in stock selection.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF Discounted Cash Flow

  The report uses 10-year forward free cash flow projections, discounted using the weighted average cost of capital (WACC) and terminal growth rate (TGR), to estimate intrinsic value. This is the core absolute valuation method for firms with stable, long-term cash flows.

• Valuation MethodEV/EBITDA valuation

  EV/EBIT Relative Valuation

  The report applies the enterprise value-to-EBIT (EV/EBIT) ratio, calibrated against historical levels and peer comparables, to neutralize capital structure differences and more accurately reflect the valuation of operating assets.

• Valuation MethodSOTP Sum-of-the-Parts Valuation

  SOTP Sum-of-the-Parts Valuation

  For companies with businesses at different life stages (e.g., Nanosonics), the report separately values mature operations (Trophon) and early-stage ventures (CORIS), as the latter typically warrant higher discount rates and distinct multiples (e.g., EV/Revenue).

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report analyzes how U.S. payer policy changes affect healthcare service utilization (demand side), and how supply chain bottlenecks and surgical capacity constraints (supply side) limit device sales—thereby gauging overall industry health.

• Cycle and Sentiment FrameworkInventory cycle (Kitchin)

  Industry Cycle and Valuation Bottom Analysis

  The report compares current valuations to historical cycle troughs (e.g., 2011), alongside trends in organic growth deceleration, to assess whether the industry has approached a cyclical bottom—and thus identify reversal opportunities.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ResMed Inc. (RMD.AX)

  Beneficiary: New product launches imminent; Noctrix acquisition expands product line; US$700 million buyback program remains active

  Strengths

  Strong buyback program; new product cycle approaching

  Weaknesses

  U.S. tariff and reimbursement pressures

  Comparison

  Compared to COH, RMD has clearer near-term catalysts and stronger capital return support

  Risks

  Implementation of U.S. tariffs, U.S. reimbursement pressure, declining treatment adherence

• Fisher & Paykel Healthcare Corp. (FPH.AX)

  Beneficiary: Multiple products pending FDA approval; capital management initiatives anticipated

  Strengths

  Expanding market opportunity in anesthesia; increased dividend

  Weaknesses

  Potential slowdown in U.S. hospital procurement

  Comparison

  Valuation premium sits in historically high range, reflecting growth expectations

  Risks

  Significant slowdown in U.S. hospital procurement, market share loss, NHFT U.S. home clinical trial failure

• Nanosonics Ltd. (NAN.AX)

  Beneficiary: Long-term growth potential from CORIS rollout; innovation fund portfolio

  Strengths

  Leadership position in infection prevention; optionality embedded in innovation portfolio

  Weaknesses

  Time lag required for CORIS rollout to offset slowing Trophon upgrade demand

  Comparison

  Compared to mature peers, NAN offers higher growth elasticity but also faces execution risk

  Risks

  CORIS launch risk, Trophon competitive risk, key management departure, product recall

• Cochlear Ltd. (COH.AX)

  Neutral: Faces market share and supply chain risks, but potential tailwind from expanded Medicare coverage

  Strengths

  Proven reliability record; R&D investment and manufacturing scale

  Weaknesses

  Market share erosion risk; surgical capacity constraints

  Comparison

  Compared to the other three stocks, COH has fewer near-term catalysts and more risk factors

  Risks

  Market share erosion (product recalls/new entrants), supply chain shortages, capacity constraints

Key data

• YTD Performance of Large U.S. Medtech Stocks-20%Year-to-date in 2026, driven by growth deceleration and multiple contraction
• Sector P/E Contraction~500bpsContraction versus 2025 levels year-to-date in 2026
• Current Sector P/E vs. 20-Year AverageLow ~700bpsCurrently ~19x; historical trough ~11x
• ResMed (RMD) Target PriceA$46.20Based on 50% DCF + 50% NTM EV/EBIT
• Fisher & Paykel (FPH) Target PriceA$42.30Based on 50% DCF + 50% EV/EBIT
• Nanosonics (NAN) Target PriceA$4.50Based on SOTP valuation
• Cochlear (COH) Target PriceA$130.80Based on 50% DCF + 50% EV/EBIT

Impact & implications

The report concludes that although near-term macro headwinds persist, the ASX medtech sector’s valuation has contracted significantly—already pricing in most negative expectations. For RMD and FPH, new product cycles and proactive capital return strategies could drive dual recovery in both earnings and valuation multiples. For NAN, while CORIS adoption lags, its innovation portfolio provides meaningful upside optionality. For COH, despite potential tailwinds from expanded Medicare coverage, competitive pressures and operational risks constrain near-term appeal. Overall, the report implies that select names with clear catalysts (RMD, FPH, NAN) offer attractive risk-reward profiles at current valuations.

Risks

• U.S. payer policy changes and Medicaid cuts reducing procedure utilization
• Persistent sales drag from China
• Shortages of raw materials or critical minerals disrupting supply chains
• Delays in new product launches or FDA approvals
• Intensifying competition leading to market share erosion
• Slower-than-expected expansion of surgical capacity

What to watch

• Progress on ResMed’s new product launches and integration of Noctrix
• FDA approval timelines and capital management actions for Fisher & Paykel
• Speed of CORIS system rollout and sales data for Nanosonics
• Progress on Cochlear’s U.S. single-sided deafness (SSD) Medicare coverage expansion
• Organic revenue growth trends and valuation shifts among large U.S. medtech stocks