With individual stocks in the healthcare space often featuring wild price swings, medical device specialist Zimmer Biomet Holdings (NYSE:ZBH) posted a relatively mundane performance. However, ZBH’s increasing relevancy could make for a compelling long-term opportunity. That’s because Zimmer enjoys a burgeoning addressable market for its key medical robotics platform.
Per its mission statement, the company seeks to “alleviate pain and improve the quality of life for people around the world.” It achieves this goal primarily through restorative therapies. Specifically, Zimmer Biomet’s claim to fame centers on ROSA Robotics, a multi-application platform that enables the medical device specialist to foster optimized outcomes.
Among the most compelling innovations undergirding ZBH stock is the ROSA Knee System, a data-producing surgical assistant. Designed by surgeons, ROSA features real-time range of motion assessment along with tools for soft tissue balancing and femoral rotation.
Inherently, demographic trends will likely play a significant role in ZBH stock. Mainly, most baby boomers either align well within the retirement-age bracket or stand on the cusp of it. With the youngest in this age cohort being around 58 years, certain parts of the body start to wear out. Cynically, this helps bolster Zimmer Biomet’s relevance.
Moving forward, investors enjoy a range of upside catalysts with ZBH stock, making it well worth consideration for patient buyers.
ZBH Stock Should Benefit from Multiple Catalysts
As TipRanks contributor Nikolaos Sismanis mentioned, 2022 was a crazy year. While a few winners existed – mainly the energy and power space – most sectors suffered valuation erosions, including healthcare. Nevertheless, for contrarians, this circumstance may signal an upside reversal, particularly for intriguing names like ZBH stock.
Going back to the demographic argument, it’s not just that older people often require greater medical care. Rather, baby boomers hold most of the wealth in the U.S. “Excluding home equity, baby boomers trumped all other generations with a median wealth of $90,060, followed by the “Silent Generation” (those born between 1928-1945) $72,280, Gen X ($48,070), Millennials ($13,110), and Gen Z ($2,000),” noted a local Fox report in Nashville.
In other words, baby boomers have the need and the money for Zimmer Biomet’s advanced solutions. This should be a natural lift for ZBH stock.
Moreover, research published by the National Library of Medicine revealed an increasing prevalence of knee pain and symptomatic knee osteoarthritis. While many assumed the recent surge in knee replacements stemmed from aging and increased obesity, in reality, the increase occurred independently of age. As well, obesity only accounted for a part of the trend.
More broadly, the medical robotics system market represents a lucrative one, commanding a valuation of $16.1 billion in 2021. Further, experts at Grand View Research peg the segment to expand at a compound annual growth rate of 17.4% from 2022 to 2030. By the end of the forecast period, the global medical robotics market could post revenues of $76.4 billion.
Data from Expert Market Research corroborates the implications of the aforementioned catalysts, with rising instances of knee problems forecasted to drive demand for treatment options. Therefore, ZBH stock stands on favorable ground.
Is ZBH Stock a Buy, According to Analysts?
Turning to Wall Street, ZBH stock has a Moderate Buy consensus rating based on six Buys, nine Holds, and one Sell rating. The average ZBH price target is $124.04, implying 1.3% upside potential.
Some Objective Data Also Supports Zimmer Biomet
To be fair, Zimmer Biomet doesn’t offer a completely encouraging investment profile. For instance, some of its financials could use some work, particularly in the balance sheet. With a cash-to-debt ratio of 0.09 times, this stat ranks worse than 94% of medical devices competitors. Still, it’s a profitable enterprise, which isn’t something every company can say right now.
Moreover, when it counts, Zimmer Biomet usually delivers. Since the fourth quarter of 2020, the company has only missed analysts’ earnings-per-share estimates once, in Q4 2021. Otherwise, the medical robotics specialist has been beating expectations.
Finally, while the immediate sentiment among hedge funds may be negative, on balance, these institutional players have been building a sizable position in ZBH stock since Q2 2021. Since they’re not in the business of losing money, their broader buy-ins help boost confidence in Zimmer Biomet. Therefore, based on the aforementioned factors, ZBH stock looks attractive.