Zimmer Biomet Holdings

Zimmer Biomet Holdings Inc earns a 5-star quantitative star rating, indicating our belief that this share class offers a compelling opportunity for investors. The stock currently trades at a 25% discount to our quantitative fair value estimate of $118.57 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The company's valuation metrics increase our fair value estimate. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. Reflecting the firm's valuation is its book value yield of 72.8%, which ranks in the top 40% compared with peers globally. The market price is low relative to the book (accounting) value of the company's equity, which contributes to our view that shares are undervalued.

The company's profitability is an additional encouraging factor. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. The firm's earnings yield of 9.3%, for example, lies in the top 30% compared with global peers. This suggests that it is generating substantial earnings relative to its share price, which further promotes our favorable price/fair value ratio.

The company's wide quantitative moat rating suggests a strong ability to maintain superior profitability thanks to competitive advantages that could persist up to two decades. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.