Overall ZM gets a fundamental rating of 7 out of 10. We evaluated ZM against 278 industry peers in the Software industry. ZM scores excellent points on both the profitability and health parts. This is a solid base for a good stock. ZM may be a bit undervalued, certainly considering the very reasonable score on growth These ratings could make ZM a good candidate for value and quality investing.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

ZM had positive earnings in the past year.
ZM had a positive operating cash flow in the past year.
In the past 5 years ZM has always been profitable.
ZM had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

With an excellent Return On Assets value of 13.99%, ZM belongs to the best of the industry, outperforming 91.73% of the companies in the same industry.
With an excellent Return On Equity value of 17.16%, ZM belongs to the best of the industry, outperforming 85.25% of the companies in the same industry.
The Return On Invested Capital of ZM (9.08%) is better than 81.65% of its industry peers.
The Average Return On Invested Capital over the past 3 years for ZM is significantly below the industry average of 10.73%.
The last Return On Invested Capital (9.08%) for ZM is above the 3 year average (5.31%), which is a sign of increasing profitability.

		Industry Rank	Sector Rank
ROA	13.99%
ROE	17.16%
ROIC	9.08%

ROA(3y)5.63%

ROA(5y)9.55%

ROE(3y)6.98%

ROE(5y)12.42%

ROIC(3y)5.31%

ROIC(5y)8.46%

1.3 Margins

With an excellent Profit Margin value of 33.17%, ZM belongs to the best of the industry, outperforming 91.37% of the companies in the same industry.
ZM's Profit Margin has improved in the last couple of years.
ZM has a Operating Margin of 23.24%. This is amongst the best in the industry. ZM outperforms 88.85% of its industry peers.
In the last couple of years the Operating Margin of ZM has grown nicely.
ZM has a Gross Margin of 76.89%. This is in the better half of the industry: ZM outperforms 71.58% of its industry peers.
ZM's Gross Margin has been stable in the last couple of years.

		Industry Rank	Sector Rank
OM	23.24%
PM (TTM)	33.17%
GM	76.89%

OM growth 3Y-12.41%

OM growth 5Y53.6%

PM growth 3Y-13.57%

PM growth 5Y44.03%

GM growth 3Y0.67%

GM growth 5Y-1.43%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

ZM has a Return on Invested Capital (ROIC), which is below the Cost of Capital (WACC), which means it is destroying value.
The number of shares outstanding for ZM has been reduced compared to 1 year ago.
ZM has more shares outstanding than it did 5 years ago.
There is no outstanding debt for ZM. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.

2.2 Solvency

ZM has an Altman-Z score of 9.85. This indicates that ZM is financially healthy and has little risk of bankruptcy at the moment.
With an excellent Altman-Z score value of 9.85, ZM belongs to the best of the industry, outperforming 91.01% of the companies in the same industry.
There is no outstanding debt for ZM. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.

		Industry Rank	Sector Rank
Debt/Equity	0
Debt/FCF	0
Altman-Z	9.85

ROIC/WACC0.82

WACC11.08%

2.3 Liquidity

A Current Ratio of 4.45 indicates that ZM has no problem at all paying its short term obligations.
With an excellent Current ratio value of 4.45, ZM belongs to the best of the industry, outperforming 84.53% of the companies in the same industry.
ZM has a Quick Ratio of 4.45. This indicates that ZM is financially healthy and has no problem in meeting its short term obligations.
ZM's Quick ratio of 4.45 is amongst the best of the industry. ZM outperforms 84.53% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	4.45
Quick Ratio	4.45

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has been growing slightly by 6.32% over the past year.
The Earnings Per Share has been growing by 73.67% on average over the past years. This is a very strong growth
The Revenue has been growing slightly by 3.85% in the past year.
The Revenue has been growing by 49.60% on average over the past years. This is a very strong growth!

EPS 1Y (TTM)6.32%

EPS 3Y2.87%

EPS 5Y73.67%

EPS Q2Q%10.14%

Revenue 1Y (TTM)3.85%

Revenue growth 3Y4.4%

Revenue growth 5Y49.6%

Sales Q2Q%4.44%

3.2 Future

The Earnings Per Share is expected to grow by 4.04% on average over the next years.
ZM is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 3.88% yearly.

EPS Next Y12.78%

EPS Next 2Y6.29%

EPS Next 3Y5.37%

EPS Next 5Y4.04%

Revenue Next Year4.21%

Revenue Next 2Y3.87%

Revenue Next 3Y3.81%

Revenue Next 5Y3.88%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

ZM is valuated correctly with a Price/Earnings ratio of 15.64.
ZM's Price/Earnings ratio is a bit cheaper when compared to the industry. ZM is cheaper than 78.42% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 28.30, ZM is valued a bit cheaper.
Based on the Price/Forward Earnings ratio of 14.74, the valuation of ZM can be described as correct.
Based on the Price/Forward Earnings ratio, ZM is valued cheaper than 80.22% of the companies in the same industry.
ZM is valuated rather cheaply when we compare the Price/Forward Earnings ratio to 25.57, which is the current average of the S&P500 Index.

		Industry Rank	Sector Rank
PE	15.64
Fwd PE	14.74

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, ZM is valued cheaply inside the industry as 87.41% of the companies are valued more expensively.
ZM's Price/Free Cash Flow ratio is rather cheap when compared to the industry. ZM is cheaper than 86.69% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	13.63
EV/EBITDA	10.07

4.3 Compensation for Growth

The PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
The excellent profitability rating of ZM may justify a higher PE ratio.