How Do Zimmer Biomet’s Valuations Compare to Peers?



Peer comparison

On June 21, 2016, Zimmer Biomet Holdings (ZBH) was trading at a forward PE (price-to-earnings) multiple of ~14.8x compared with the industry average of ~21x. The company is trading at lower multiples than its peers Johnson & Johnson (JNJ), Stryker (SYK), and Medtronic (MDT), which are trading at forward PE multiples of 17.6x, 20.1x, and 18.1x, respectively.

The forward price-to-earnings ratio compares the company’s stock price with its estimated earnings per share for the next 12 months. For exposure to the industry, investors can invest in the iShares Russell Mid-Cap Value ETF (IWS). ZBH accounts for 0.62% of IWS’s total holdings.

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Company fundamentals

On June 17, 2016, Zimmer Biomet Holdings’ share price was $116.5, representing a rise of ~1.5% since the company’s 1Q16 earnings release on April 28, 2016. The stock traded at a 52-week high of $123.4 on May 27, 2016, and at a 52-week low of $88.27 on February 12, 2016.

Zimmer Biomet Holdings has a strong market position and an attractive product portfolio. Though the currency headwinds and the Biomet integration challenges continue to affect the company’s revenues, the company’s expanding product portfolio, its leading market position, its strong growth strategy, and its market potential will help drive the company’s valuation and stock performance. 

The Biomet acquisition positioned the company as a leading player in the musculoskeletal market and provided scale and breadth to the company’s product portfolio. The company has been further expanding its portfolio through a number of complementary acquisitions and partnerships. 

Zimmer Biomet Holdings has strong cash flows and immense growth potential. The company is one of the key players in the knee and hip implant market, and with the acquisition of LDR, it’s expected to advance in the spine segment as well.


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