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Argus Research has upgraded Zimmer Biomet Holdings Inc. (NYSE:ZBH) on launching new products and tuck-in M&A to build future growth drivers.
One such driver is the ROSA system, which assists in robotic surgeries to implant replacement knee, hip, and shoulder joints. ROSA is also used in neurosurgery.
Another recent product launch is the cementless knee implant, which allows for shorter procedure times and helps to improve hospital staffing efficiency.
Related: What’s Going On With Zimmer Biomet Shares After Q1 Earnings?
The analyst notes that Zimmer plans to introduce more than 40 new products over the next 24 to 36 months. Zimmer Biomet has a tailwind from favorable population demographics and a post-pandemic recovery in elective procedure volume.
The analyst upgrades from Hold to Buy with a price target of $150.
Argus writes that Zimmer Biomet trades at 14.1 times its 2025 EPS estimate, below the average multiple of 21.2 for its coverage universe of MedTech stocks.
“We believe this is an attractive valuation for Zimmer-Biomet. We like the strategy of growing EPS faster than revenue and free cash flow faster than EPS,” the analyst writes.
The analyst notes that the company admitted that its previous focus on maintaining strong gross and operating margins led to under-investment in product development. However, introducing new and innovative products will drive higher pricing, enhance margins, and stimulate revenue growth in the long run, Argus writes.
Price Action: ZBH shares are up 0.10% at $119.17 at last check Tuesday.
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Posted In: ZBH
