Is Zimmer Biomet (ZBH) Attractive After Mixed Returns And A Bullish DCF Estimate

• If you have been wondering whether Zimmer Biomet Holdings is offering good value at around US$94.75, this article walks through what the current price might be telling you.
• The stock has recently seen mixed performance, with a 4.4% gain over the last 7 days, a 0.5% return over 30 days, a 5.3% return year to date, but a 7.2% decline over the last year and deeper falls of 22.5% and 36.3% across the past 3 and 5 years.
• These moves sit against a backdrop of ongoing interest in orthopedic and medical device companies. In this space, investors frequently weigh long product cycles, regulatory developments, and procedure volumes when reassessing risk and opportunity. For Zimmer Biomet, that broader sector context helps frame whether recent price action is simply noise or part of a longer shift in how the market views the company.
• On our checks, Zimmer Biomet scores 5 out of 6 on undervaluation tests, giving it a valuation score of 5. Next we will look at how different valuation approaches line up, before finishing with a perspective that can help you make more sense of these numbers.

Find out why Zimmer Biomet Holdings's -7.2% return over the last year is lagging behind its peers.

Approach 1: Zimmer Biomet Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and then discounting those back to a single present value figure.

For Zimmer Biomet Holdings, the model used is a 2 Stage Free Cash Flow to Equity approach. The company’s latest twelve month free cash flow is about $1.04b. Analysts provide explicit free cash flow estimates for the next few years, and beyond that, Simply Wall St extends the projections. For example, projected free cash flow for 2028 is $1.996b, and the model includes a full set of yearly projections out to 2035, each discounted back to reflect today’s dollars.

Bringing all those discounted cash flows together gives an estimated intrinsic value of about $167.07 per share. Against a current share price of roughly $94.75, the DCF output suggests the stock is around 43.3% undervalued based on these assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Zimmer Biomet Holdings is undervalued by 43.3%. Track this in your watchlist or portfolio, or discover 877 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Zimmer Biomet Holdings.

Approach 2: Zimmer Biomet Holdings Price vs Earnings

For a profitable company like Zimmer Biomet Holdings, the P/E ratio is a useful starting point because it tells you how much you are paying for each dollar of current earnings. What counts as a normal or fair P/E often reflects how the market views a company’s growth prospects and risk profile, with higher growth or lower perceived risk usually associated with a higher multiple.

Zimmer Biomet currently trades on a P/E of 23.3x. That sits below the Medical Equipment industry average of 30.7x and also below the broader peer group average of 47.1x. Simply Wall St calculates a Fair Ratio of 29.1x for Zimmer Biomet, which is the P/E level that would be expected after factoring in its earnings growth profile, industry, profit margins, market cap and company specific risks.

This Fair Ratio can be more informative than a straight comparison with peers or the industry because it adjusts for key company characteristics rather than assuming all businesses deserve the same multiple. Comparing Zimmer Biomet’s current 23.3x P/E with the 29.1x Fair Ratio indicates the shares are trading below the level implied by those fundamentals.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1448 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Zimmer Biomet Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, which let you set out your own story for Zimmer Biomet Holdings, link that story to explicit forecasts for revenue, earnings and margins, translate those into a fair value, then compare that fair value with the current price to help you decide what to do. The narrative updates as new news or earnings arrive, so one investor might frame Zimmer Biomet around higher growth, margin expansion and a fair value closer to US$138, while another might focus more on pricing pressure, regulatory and execution risks and settle on a fair value closer to US$96.

Do you think there's more to the story for Zimmer Biomet Holdings? Head over to our Community to see what others are saying!

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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