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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 increase on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Zimmer Biomet Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Zimmer Biomet Holdings
What is Zimmer Biomet Holdings worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.8% below my intrinsic value, which means if you buy Zimmer Biomet Holdings today, you’d be paying a fair price for it. And if you believe the company’s true value is $143.98, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy 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.
Can we expect growth from Zimmer Biomet Holdings?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Zimmer Biomet Holdings, it is expected to deliver a relatively unexciting top-line growth of 8.0% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? ZBH’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on ZBH, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.