Is Zimmer Biomet Poised for Growth After Recent 16% Stock Rally in 2025?

If you are watching Zimmer Biomet Holdings and wondering what your next move should be, you are not alone. With the stock climbing over 16% in the last three months and recently closing at $107.71, investors are buzzing about its growth prospects. Yet, there is still hesitation, especially with last year’s total return sitting slightly in the red.

So, is this a stock ready to keep running, or are there risks lurking under the surface? Let’s look at the numbers. Over the past year, Zimmer Biomet’s revenue grew just over 5%, but its net income jumped nearly 16%. Analysts have only a modest price target above the current share price, but the real story is in the valuation.

Zimmer Biomet scores an impressive 5 out of 6 on our valuation scorecard, which means it is undervalued in most of the key checks we track. That is a rare feat and a strong positive for anyone thinking long-term. The stock even trades at a surprising 35.5% discount to its estimated intrinsic value, suggesting an opportunity if you trust the numbers.

Next, we will break down exactly how Zimmer Biomet stacks up across different valuation methods. Also, we will share a smarter way to understand what the numbers are really telling us about the stock’s outlook.

Zimmer Biomet Holdings delivered -5.5% returns over the last year. See how this stacks up to the rest of the Medical Equipment industry.

Approach 1: Zimmer Biomet Holdings Cash Flows

The Discounted Cash Flow (DCF) model aims to estimate what a company is truly worth by projecting its future cash flows and discounting them back to today’s value. This approach helps illustrate what investors might be willing to pay now for the company's expected profits in the years to come.

Zimmer Biomet Holdings reported Free Cash Flow (FCF) of over $1.0 billion in the last twelve months. Analysts expect its FCF to steadily climb, reaching around $2.3 billion by 2035. Annual forecasts suggest a continued, healthy increase in cash generation over the next decade.

According to these projections, the model arrives at an estimated intrinsic value of $166.94 per share. When compared to the most recent share price of $107.71, this calculation suggests Zimmer Biomet is trading at a 35.5% discount to its intrinsic value. This indicates it may be notably undervalued based on cash flow fundamentals.

In summary, for those seeking a company with reliable cash generation and if the numbers hold up, Zimmer Biomet appears to offer solid value at current prices.

Result: UNDERVALUED

Our DCF analysis suggests Zimmer Biomet Holdings is undervalued by 35.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Zimmer Biomet Holdings Price vs Earnings

For established, profitable companies like Zimmer Biomet Holdings, the Price-to-Earnings (PE) ratio is a widely recognized measure of value. It tells investors how much they are paying for a dollar of current earnings, making it a practical tool when those earnings are stable and growing.

Deciding what makes a “normal” or “fair” PE ratio depends on several factors, including a company's growth expectations and the perceived risk of its business. Rapidly growing companies or those with very reliable earnings typically trade at higher PE ratios, reflecting optimism and confidence in future profits. In contrast, companies facing uncertainty or lower growth tend to see their PE ratios trade lower.

Zimmer Biomet’s current PE ratio sits at 25.9x, which is notably lower than both the industry average of 30.3x and the average of its direct peers at 44.9x. To provide a more tailored benchmark, Simply Wall St’s proprietary Fair Ratio assesses several company-specific factors such as earnings growth, margin profile, business risks, and market position. This analysis delivers a Fair Ratio of 28.1x for Zimmer Biomet.

Comparing its current PE of 25.9x with a Fair Ratio of 28.1x, Zimmer Biomet appears modestly undervalued using this metric. The gap is not extreme, but it does signal that the stock could offer value relative to its fundamentals and industry backdrop.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Zimmer Biomet Holdings Narrative

While financial models and ratios tell part of the story, the concept of a “Narrative” takes investing further by connecting your perspective on Zimmer Biomet’s future to the numbers behind its fair value and forecasts. On Simply Wall St, Narratives make it easy for anyone to articulate their view on factors such as revenue growth or profit margins, and instantly see how those assumptions shape the estimated fair value. This approach makes the investing process both accessible and dynamic across a community of millions of users.

Narratives help you decide when to buy or sell by allowing you to compare what you believe the business is worth (Fair Value) to its current share price. They continuously update if new news or earnings shift the outlook, ensuring your conclusions stay relevant. For example, one investor might build a Narrative projecting rapid margin expansion and set a fair value of $138 per share, while another might focus on regulatory and pricing risks, leading to a more cautious $96 target. This demonstrates how Narratives offer a framework for real-time, personalized decision-making as new information emerges.

Do you think there's more to the story for Zimmer Biomet Holdings? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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