Head to Head Analysis: Steris (STE) and Zimmer Biomet (NYSE:ZBH)

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Steris (NYSE: STE) and Zimmer Biomet (NYSE:ZBH) are both medical companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, valuation, institutional ownership, dividends, risk and analyst recommendations.

Profitability

This table compares Steris and Zimmer Biomet’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Steris 11.10% 11.55% 6.93%
Zimmer Biomet 21.81% 14.36% 6.02%

Dividends

Steris pays an annual dividend of $1.24 per share and has a dividend yield of 1.2%. Zimmer Biomet pays an annual dividend of $0.96 per share and has a dividend yield of 0.9%. Steris pays out 29.9% of its earnings in the form of a dividend. Zimmer Biomet pays out 12.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Steris has increased its dividend for 8 consecutive years and Zimmer Biomet has increased its dividend for 2 consecutive years. Steris is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Steris has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500. Comparatively, Zimmer Biomet has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500.

Earnings and Valuation

This table compares Steris and Zimmer Biomet’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Steris $2.62 billion 3.44 $290.91 million $4.15 25.66
Zimmer Biomet $7.82 billion 2.90 $1.81 billion $8.03 13.92

Zimmer Biomet has higher revenue and earnings than Steris. Zimmer Biomet is trading at a lower price-to-earnings ratio than Steris, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

90.7% of Steris shares are held by institutional investors. Comparatively, 87.2% of Zimmer Biomet shares are held by institutional investors. 2.4% of Steris shares are held by insiders. Comparatively, 0.7% of Zimmer Biomet shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Steris and Zimmer Biomet, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Steris 0 1 3 0 2.75
Zimmer Biomet 0 7 17 1 2.76

Steris presently has a consensus price target of $80.25, suggesting a potential downside of 24.63%. Zimmer Biomet has a consensus price target of $137.71, suggesting a potential upside of 23.22%. Given Zimmer Biomet’s stronger consensus rating and higher probable upside, analysts plainly believe Zimmer Biomet is more favorable than Steris.

Summary

Zimmer Biomet beats Steris on 11 of the 18 factors compared between the two stocks.

About Steris

STERIS plc develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and surgical and gastrointestinal support products and services for healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide. The company's Healthcare Products segment offers steam, vaporized hydrogen peroxide, and ethylene oxide sterilizers, as well as liquid chemical sterilant processing systems; automated washer/disinfector systems; general and specialty surgical tables, surgical and examination lights, equipment management systems, operating room storage cabinets, warming cabinets, scrub sinks, and other accessories; and gastrointestinal devices and accessories. It also provides OR integration, OR and sterile processing department, workflow, patient tracking, and instrument management solutions; and cleaning chemistries and sterility assurance products. In addition, this segment offers preventive maintenance and repair, sterilization and surgical management consulting, and remote equipment monitoring services, as well as other support services. The company's Healthcare Specialty Services segment provides solutions, and outsourced and managed services for acute care hospitals and other healthcare settings, including instrument and endoscope repair and maintenance solutions; and custom process improvement consulting services. Its Life Sciences segment offers formulated cleaning chemistries, vaporized hydrogen peroxide generators, high-purity water equipment, steam sterilizers, and washers/disinfectors. The company's Applied Sterilization Technologies segment provides contract sterilization services using gamma, electron beam, and X-ray technologies, as well as ethylene oxide gas; and laboratory testing and validation services. It operates a network of 50 facilities. The company was founded in 1985 and is headquartered in Leicester, the United Kingdom.

About Zimmer Biomet

Zimmer Biomet Holdings, Inc., together with its subsidiaries, designs, manufactures, and markets musculoskeletal healthcare products and solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It operates through four segments: Spine, less Asia Pacific; Office Based Technologies; Craniomaxillofacial and Thoracic; and Dental. The company provides orthopaedic reconstructive products, such as knee and hip replacement products; S.E.T. products, including surgical, sports medicine, biologics, foot and ankle, extremities, and trauma products; spine products comprising medical devices and surgical instruments; and face and skull reconstruction products, as well as products that fixate and stabilize the bones of the chest to facilitate healing or reconstruction after open heart surgery, trauma, or for deformities of the chest. It also offers dental products that include dental reconstructive implants, and dental prosthetic and regenerative products; and bone cement and spinal fusion stimulators. The company's products and solutions are used to treat patients suffering from disorders of, or injuries to, bones, joints, or supporting soft tissues. It serves orthopaedic surgeons, neurosurgeons, oral surgeons, dentists, hospitals, stocking distributors, healthcare dealers, and other specialists, as well as agents, healthcare purchasing organizations, or buying groups. The company was formerly known as Zimmer Holdings, Inc. and changed its name to Zimmer Biomet Holdings, Inc. in June 2015. Zimmer Biomet Holdings, Inc. was founded in 1927 and is headquartered in Warsaw, Indiana.

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