3 Reasons to Avoid ZBH and 1 Stock to Buy Instead

3 Reasons to Avoid ZBH and 1 Stock to Buy Instead

Petr Huřťák

Thu, February 19, 2026 at 1:01 PM GMT+9 3 min read

In this article:

ZBH

-0.27%

^GSPC

-0.34%

Over the last six months, Zimmer Biomet’s shares have sunk to $98.28, producing a disappointing 5.8% loss - a stark contrast to the S&P 500’s 6.7% gain. This may have investors wondering how to approach the situation.

Is now the time to buy Zimmer Biomet, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Zimmer Biomet Not Exciting?

Despite the more favorable entry price, we’re cautious about Zimmer Biomet. Here are three reasons why ZBH doesn’t excite us and a stock we’d rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Zimmer Biomet grew its sales at a mediocre 5.3% compounded annual growth rate. This was below our standard for the healthcare sector.

Zimmer Biomet Quarterly Revenue

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Zimmer Biomet’s revenue to rise by 3.8%, a slight deceleration versus its 5.3% annualized growth for the past five years. This projection is underwhelming and suggests its products and services will face some demand challenges.

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 4.1%, 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. Following the recent decline, the stock trades at 11.6× forward P/E (or $98.28 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of our top digital advertising picks.

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