ZIMMER BIOMET HOLDINGS INC (NYSE:ZBH) - An Undervalued Stock Worth Considering

ZIMMER BIOMET HOLDINGS INC (NYSE:ZBH) was identified as a decent value stock by our screening process. The company, a leader in orthopedic medical devices, shows strong profitability and reasonable financial health while trading at an attractive valuation. Below, we examine why ZBH may appeal to value investors.

Valuation

ZBH stands out with a Valuation Rating of 7/10, indicating it is priced attractively compared to peers. Key points:

• P/E Ratio of 11.59 – Well below the industry average of 26.91 and the S&P 500’s 26.34.
• Forward P/E of 10.88 – Suggests continued undervaluation relative to future earnings.
• Enterprise Value/EBITDA – Cheaper than 91% of industry competitors.
• Price/Free Cash Flow – More favorable than nearly 90% of peers.

Despite these metrics, the stock’s PEG ratio is elevated, suggesting investors should weigh growth expectations carefully.

Profitability

ZBH earns a high Profitability Rating of 8/10, supported by:

• Operating Margin of 19.59% – Outperforming 92.5% of industry peers.
• Gross Margin of 71.05% – Among the best in the sector.
• ROIC of 5.99% – Above the three-year average, signaling improving efficiency.

Financial Health

With a Health Rating of 5/10, ZBH has some strengths but also areas to monitor:

• Current Ratio of 2.44 – Indicates solid short-term liquidity.
• Debt/Equity of 0.53 – Lower than many peers, though debt levels have risen slightly.
• ROIC below WACC – A concern, as the company is not currently generating returns above its cost of capital.

Growth

ZBH’s Growth Rating of 4/10 reflects modest but improving trends:

• Revenue Growth (Next 3 Years): 4.93% – A positive shift after past declines.
• EPS Growth Acceleration – Expected to rise from 0.33% (past) to 5.73% (future).

Dividend

ZBH offers a Dividend Rating of 7/10, with:

• Yield of 1.06% – Below the S&P 500 average but competitive within its industry.
• 10+ Years of Payouts – A reliable track record with sustainable payout ratios.

Our Decent Value Stocks screener lists more stocks with strong valuations and fundamentals.
For a deeper look, review the full fundamental report on ZBH.

Disclaimer

This is not investment advice. Always conduct your own research before making financial decisions.