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Last update on 2024-06-05

Zimmer Biomet Holdings (ZBH) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Zimmer Biomet Holdings (ZBH) scores 8/9 on Piotroski F-Score in 2023, showcasing strong profitability, liquidity, and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Zimmer Biomet Holdings (ZBH) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is a scale from 0 to 9 indicating a company's financial health, according to profitability, liquidity, and operating efficiency criteria. Zimmer Biomet Holdings (ZBH) scored 8 out of 9, indicating a strong financial position. The company has positive net income and cash flow, growing return on assets (ROA), and consistent operational efficiency. They also show positive cash flow surpassing net income, reduced leverage, share buybacks, growing gross margin, and improving asset turnover. However, there was a slight decrease in the current ratio, showing lower liquidity compared to the previous year.

Insights for Value Investors Seeking Stable Income

Considering Zimmer Biomet Holdings (ZBH)'s strong Piotroski F-Score of 8, the company demonstrates solid financial health, operational efficiency, and profitability trends. This makes ZBH a promising candidate for investors interested in fundamentally sound and potentially undervalued stocks. Investors might want to consider adding ZBH to their watchlist to continue monitoring its performance and consider it in their portfolio, considering its ability to manage debt and generate strong cash flow.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Zimmer Biomet Holdings (ZBH)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability. A positive net income suggests the company is running profitably, while a negative net income suggests losses.

Historical Net Income of Zimmer Biomet Holdings (ZBH)

Zimmer Biomet Holdings (ZBH) reported a net income of $1.024 billion in 2023, indicating a profitable year. Historically, over the past two decades, ZBH has faced some fluctuations. Notably, in 2015, there was a spike in net income reaching approximately $1.81 billion. However, significant declines were observed in 2018 and 2020 with net incomes of -$379 million and -$138.9 million respectively. The latest figure of 2023 reinforces a positive trend post-2020, thus earning a commendable one point in this Piotroski criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the cash inflows and outflows from regular business operations.

Historical Operating Cash Flow of Zimmer Biomet Holdings (ZBH)

The CFO of Zimmer Biomet Holdings (ZBH) for 2023 stands at $1,581,600,000. This Cash Flow is positive, thereby indicating strong operational efficiency and the ability to generate sufficient cash to sustain and grow its operations. Historically, ZBH has demonstrated consistent positive CFO, except for slightly lower fluctuations in some years. This positive trend in CFO is promising for the company's financial health and sustainability.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is an important profitability metric that shows how efficiently a company is using its assets to generate earnings.

Historical change in Return on Assets (ROA) of Zimmer Biomet Holdings (ZBH)

The ROA for Zimmer Biomet Holdings (ZBH) increased from 0.0104 in 2022 to 0.0481 in 2023. This improvement in ROA adds 1 point under the Piotroski criteria, indicating a positive trend. An increased ROA indicates better asset utilization to generate profit, which is beneficial for investors. However, compared to the industry median ROA, which has been significantly higher (average around 0.60) over the last 20 years, ZBH's ROA is still relatively low, pointing to room for potential improvement.

Operating Cashflow are higher than Netincome?

Operating Cash Flow being higher than Net Income indicates efficient use of cash in generating operations and overall profitability.

Historical accruals of Zimmer Biomet Holdings (ZBH)

In 2023, Zimmer Biomet Holdings (ZBH) reported an Operating Cash Flow of $1,581,600,000 compared to a Net Income of $1,024,000,000. This means the Operating Cash Flow is higher than Net Income, which is a positive indicator. Over the past 20 years, Zimmer Biomet has generally maintained a strong operating cash flow. For instance, during the financially turbulent year of 2020, their operating cash flow was $1,204,500,000 despite a negative net income of $138,900,000. Consequently, in 2023, Zimmer Biomet earns 1 point for this criterion, highlighting operational efficiency and good profitability trends. Historical data supports this trend with consistent cash flow.

Liquidity of Zimmer Biomet Holdings (ZBH)

Leverage is declining?

Change in leverage is crucial as it indicates the company's additional reliance on debt financing. This affects financial risk and potential return on equity.

Historical leverage of Zimmer Biomet Holdings (ZBH)

The leverage ratio for Zimmer Biomet Holdings (ZBH) for the year 2023 stood at 0.2332, compared to 0.2527 in 2022, indicating a decline in leverage. This is noteworthy given the last 20 years of leverage data which show variances in the firm's leverage positions. Over the two-decade span, the leverage was highest in 2015 at 0.4246. However, the most recent figures show a trend towards lower leverage, which generally implies lower financial risk. Therefore, based on the criterion's requirement, a decline in leverage means we assign 1 point. This decreasing leverage trend is beneficial for ZBH as it suggests reduced reliance on borrowed funds, potentially leading to improved financial stability and investor confidence.

Current Ratio is growing?

Current ratio measures the company's ability to cover its short-term obligations with its short-term assets and is a key indicator of liquidity.

Historical Current Ratio of Zimmer Biomet Holdings (ZBH)

Comparing the current ratio of Zimmer Biomet Holdings (ZBH) between 2022 and 2023 shows a decrease from 1.8774 to 1.6132. Despite maintaining a stable liquidity position above the crucial 1.0 threshold, the downward trend indicates a reduced margin for covering short-term liabilities in 2023 compared to 2022. Over the last 20 years, ZBH's current ratio peaked in 2010 (4.2843) and witnessed significant variations since. The industry median, meanwhile, also experienced volatility, though ZBH's ratio largely underperformed relative to the sector median in recent years. With a 2023 figure below the sector median (4.0615), ZBH scores 0 points for this criterion under the Piotroski F-score framework.

Number of shares not diluted?

Change in shares outstanding refers to the difference in the number of a company's shares that are currently available to be traded in the market. This is crucial as it affects EPS and can indicate company actions.

Historical outstanding shares of Zimmer Biomet Holdings (ZBH)

Comparing the outstanding shares for Zimmer Biomet Holdings from 2022 (209.6 million shares) to 2023 (208.7 million shares), there is a decrease of 0.9 million shares. This is a positive trend for shareholders, as a reduction in outstanding shares usually means fewer shares are dividing the company’s profits, thereby possibly increasing the Earnings Per Share (EPS). This reduction also hints at possible share buybacks by the company, which can signal management's confidence in the company's future prospects. Historical data over the last 20 years reveals similar decreases in various years, indicating that Zimmer Biomet Holdings may have consistently followed this shareholder-friendly approach. Thus, for this criterion, we add 1 point.

Operating of Zimmer Biomet Holdings (ZBH)

Cross Margin is growing?

Gross Margin signifies the core profitability before other expenses. A higher margin indicates a healthier, more efficient business.

Historical gross margin of Zimmer Biomet Holdings (ZBH)

For Zimmer Biomet Holdings (ZBH), the Gross Margin increased from 0.709 in 2022 to 0.7182 in 2023. This trend is positive, reflecting an improvement in the company's core profitability and efficiency. Notably, over the last 20 years, ZBH's Gross Margin has consistently remained above the industry median, reinforcing its strong competitive position. For example, in 2022, the industry median was 0.6438 compared to ZBH's 0.709. Thus, not only has ZBH shown improvement year-over-year, but it also continues to outperform its industry peers, earning it a positive score for this criterion.

Asset Turnover Ratio is growing?

Asset Turnover evaluates a company's efficiency in using its assets to generate revenue, essential for assessing operational efficiency.

Historical asset turnover ratio of Zimmer Biomet Holdings (ZBH)

The asset turnover ratio for Zimmer Biomet Holdings (ZBH) has increased from 0.3117 in 2022 to 0.3474 in 2023. This improvement signifies a positive trend, indicating that the company has been more effective in utilizing its assets to generate sales. Historically, ZBH's asset turnover has seen a decline from 0.6321 in 2003 to a low of 0.2498 in 2020. The recent uptick to 0.3474 in 2023 is an encouraging sign, suggesting better asset management and potentially improved profitability. Thus, for Piotroski criteria, ZBH earns 1 point.


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