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3 Reasons to Avoid ZBH and 1 Stock to Buy Instead

By: StockStory

October 03, 2025 at 00:01 AM EDT

ZBH Cover Image

Over the past six months, Zimmer Biomet’s stock price fell to $99.17. Shareholders have lost 12% of their capital, which is disappointing considering the S&P 500 has climbed by 24.7%. This might have investors contemplating their next move.

Is now the time to buy Zimmer Biomet, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Zimmer Biomet Not Exciting?

Despite the more favorable entry price, we don't have much confidence in Zimmer Biomet. Here are three reasons we avoid ZBH and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Zimmer Biomet’s sales grew at a tepid 2.6% compounded annual growth rate over the last five years. This fell short of our benchmarks.

2. Weak Constant Currency Growth Points to Soft Demand

In addition to reported revenue, constant currency revenue is a useful data point for analyzing Surgical Equipment & Consumables - Diversified companies. This metric excludes currency movements, which are outside of Zimmer Biomet’s control and are not indicative of underlying demand.

Over the last two years, Zimmer Biomet’s constant currency revenue averaged 4.7% year-on-year growth. This performance slightly lagged the sector and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. Zimmer Biomet Constant Currency Revenue Growth

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Zimmer Biomet historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.2%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

Zimmer Biomet Trailing 12-Month Return On Invested Capital

Final Judgment

Zimmer Biomet isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 12.2× forward P/E (or $99.17 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.

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