ZBH – Market expectations are for Uniform ROA to fade, and management may have concerns about their hip business, procedure demand, and profitability

March 31, 2022

  • Zimmer Biomet Holdings (ZBH) currently trades near corporate but above historical averages relative to Uniform earnings, with a 23.4x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to fade to 15%, accompanied by 5% Uniform asset growth.

  • Meanwhile, analysts expect Uniform ROA to compress to 16% in 2022, accompanied by 5% Uniform asset shrinkage.

  • If sustained going forward, these levels would imply a stock price closer to $82, representing approximately 35% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about their hip business, procedure demand, and profitability.

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