Let's talk about the popular Zimmer Biomet Holdings, Inc. (NYSE:ZBH). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$163 at one point, and dropping to the lows of US$140. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Zimmer Biomet Holdings' current trading price of US$149 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Zimmer Biomet Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Zimmer Biomet Holdings still cheap?
Good news, investors! Zimmer Biomet Holdings is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 33.9x is currently well-below the industry average of 49.55x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Zimmer Biomet Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Zimmer Biomet Holdings generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 77% over the next couple of years, the future seems bright for Zimmer Biomet Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since ZBH is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on ZBH for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ZBH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Zimmer Biomet Holdings has 2 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Zimmer Biomet Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
What are the risks and opportunities for Zimmer Biomet Holdings?
Earnings are forecast to grow 21.48% per year
Profit margins (4.1%) are lower than last year (11.7%)
Large one-off items impacting financial results
Has a high level of debt
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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Zimmer Biomet Holdings
Zimmer Biomet Holdings, Inc., together with its subsidiaries, operates in the musculoskeletal healthcare business in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.
Adequate balance sheet with moderate growth potential.