ZBH, Zimmer Biomet Holdings, Inc.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is led by Knees (40%) and S E T (26%), with 2 more lines behind.
- Situation
- Cyclical. margins collapse repeatedly across the cycle, a single year misleads; look at normalized, through-cycle earnings and the balance sheet at the trough.
- What moves the needle
- Volume against price, and shelf position. What decides it: whether it can raise prices without losing the customer, and whether the brand still commands its margin.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median 4%, above 15% in 0 of 10 years). Owner earnings agree: roughly 18% of revenue reaches owners as cash, consistently. The cycle and the balance sheet decide this one, so weigh the worst year against the median, and read the 10-K.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Revenue spreads across 4 lines, the largest Knees at 40%.
- Knees40%$3.3B
- S E T26%$2.2B
- Hips25%$2.1B
- Technology And Data, Bone Cement and Surgical8%$666M
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $7.7B | $7.8B | $7.9B | $8.0B | $6.1B | $6.8B | $6.9B | $7.4B | $7.7B | $8.2B | $8.4B |
| Gross marginGross mgn | 69% | 73% | 71% | 72% | 70% | 71% | 71% | 72% | 71% | 70% | 70% |
| Operating marginOp. mgn | 10.7% | 10.2% | 0.4% | 14.3% | 1.4% | 12.6% | 10.0% | 17.3% | 16.7% | 13.3% | 14.0% |
| Net incomeNet inc. | $306M | $1.8B | ($379M) | $1.1B | ($139M) | $402M | $231M | $1.0B | $904M | $705M | $761M |
| EPS (diluted)EPS | $1.51 | $8.90 | $-1.86 | $5.47 | $-0.67 | $1.91 | $1.10 | $4.88 | $4.43 | $3.55 | $3.89 |
| Owner earningsOwner earn. | $1.4B | $1.4B | $1.6B | $1.4B | $1.1B | $1.4B | — | $1.3B | $1.3B | $1.5B | $1.5B |
| ROICROIC | 3% | 4% | 0% | 6% | 0% | 4% | 3% | 7% | 6% | 5% | 5% |
| Cash & investmentsCash+inv | $634M | $524M | $543M | $618M | $802M | $378M | $376M | $416M | $526M | $592M | $457M |
| Net debt / (cash)Net debt | $10.6B | $9.6B | $8.4B | $7.6B | $7.3B | $6.7B | $5.3B | $5.4B | $5.7B | $6.9B | $7.0B |
| Dividends / shareDiv/sh | $0.93 | $0.95 | $0.96 | $0.95 | $0.96 | $0.95 | $0.96 | $0.96 | $0.96 | $0.96 | — |
| Book value / shareBVPS | $47.77 | $57.61 | $55.39 | $59.93 | $58.91 | $60.17 | $57.16 | $59.52 | $61.15 | $63.90 | $64.73 |
Owner’s Scorecard
Will it survive?
- No meaningful interest burdenLittle or no interest expense reported
Little or no interest expense reported, the business isn't leaning on lenders to operate.
- HighTotal debt $7.5B ÷ operating income $1.1B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $6.9BHeavy net debtCash $592M − debt $7.5B
Netting $592M of cash and short-term investments against $7.5B of debt leaves $6.9B owed, about 6.3× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Capital-hungryDSO 76 + DIO 335 − DPO 44 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Below averageNOPAT $932M ÷ invested capital $19.6B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Cash machineOwner Earnings $1.5B = operating cash $1.7B − capex $225M
What an owner could take out without starving the business. That's 18% of revenue. Treating stock comp as the real expense it is (less $90M of SBC) leaves $1.4B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $1.7B ÷ net income $705M
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns about halfDividends + buybacks $677M ÷ Owner Earnings $1.5B
Of $1.5B Owner Earnings, $677M (46%) went back to shareholders, $190M dividends, $487M buybacks. Net of $90M stock comp, the real buyback was about $397M. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 0.21×HarvestingCapex $225M ÷ depreciation $1.1B
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 8 of 10
Lost money in 2 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 0 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 11% (FY2016) → 13% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC returns capital
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
- Owner earnings growth −0%/yr
Free cash to owners shrank about 0% a year over the record.
- Worst year 2018 · 0.4% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count −0.2%/yr
Roughly flat share count, little dilution, little buyback.
- Dividend record paid
Paid a dividend in 10 of the years on record.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2016–2025
Over the record, the business generated $14.0B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a deleverager, a meaningful share of cash went to paying down debt.
- Reinvested$1.7B · 12%
- Dividends$1.8B · 13%
- Buybacks$2.5B · 18%
- Retained (debt / cash)$8.1B · 58%
It reinvested $1.7B (12%) back into the business and returned $4.2B (30%) to owners, $1.8B in dividends, $2.5B in buybacks. Total debt fell $3.8B across the span.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$90M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 8% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
3 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $8.2B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity NearCurrent ratio ≥ 2× · 1.98×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $7.5B vs $2.5B WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability MissA profit every year (10-yr record) · 2 loss years
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +51%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $3.55/share and book value $63.90/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what Zimmer Biomet Holdings, Inc. has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $1.5B on 196M diluted shares; net debt $7.0B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Pricing power & competitionMD&A
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“However, we have had success in offsetting negative effects of pricing pressure due to internal initiatives and being able to pass some inflationary impacts on to customers.”
From the recordOperating margin14.0% now (TTM), off a 17.3% peak (FY2023) - Debt terms & refinancingRisk Factors
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“We were in compliance with all covenants under the 2025 Five-Year Credit Agreement as of December 31, 2025.”
From the recordBalance sheet (TTM)$6.9B heavy net debt · no real interest burden - Litigation & contingenciesMD&A
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“Commitments and Contingencies - We are involved in various ongoing proceedings, legal actions and claims, including product liability, intellectual property, stockholder matters, tax disputes, commercial disputes, employment matters, whistleblower and qui tam claims and investigations, governmental …”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyMD&A
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Under the Tax Cuts and Jobs Act of 2017, we have a $85.9 million current liability remaining from a one-time tax on the mandatory deemed repatriation of post-1986 untaxed foreign earnings and profits ("transition tax") for the deemed repatriation of unremitted foreign earnings.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “The increase as a percentage of net sales was primarily due to the inventory charges, tariffs and inventory step-up, but was partially offset by a favorable mix shift to higher margin products and markets. 33 Intangible asset amortization expense increased in amount and as a percentage of net sales …”
- “These costs were partially offset by $77.1 million of net gains related declines in the estimated fair values of contingent consideration from acquisitions due to updated forecasts of net sales. 34 Other Income (Expense), net, Interest Expense, net, and Income Taxes In 2025, we recognized a gain of …”
- “("Monogram") on October 7, 2025, including acquisition-related costs and higher interest expense incurred for debt borrowed for the acquisitions; U.S. tariffs; higher performance-related compensation; and investments made to direct-to-patient marketing, medical education and information technology i…”
- “The increase in amount was driven by Paragon 28-related R&D expenses and higher spending on certain technology-based projects, but were partially offset by lower spending on our initial compliance with the European Union Medical Device Regulation as we continue to make progress on the approvals of o…”
- “Upon receiving regulatory approval subsequent to the Embody acquisition date, the $ 36.3 million of IPR&D was reclassified to a definite-lived intangible asset and began amortizing over the applicable estimated useful life. 72 We have not included pro forma information and certain other information …”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Medical devices
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| BSXBoston Scientific Corp | $20.1B | 69% | 18.0% | 9% | 18% |
| BAXBaxter International Inc | $11.2B | 30% | -2.7% | -2% | 3% |
| ISRGIntuitive Surgical, Inc. | $10.1B | 66% | 29.3% | 18% | 25% |
| ZBHZimmer Biomet Holdings, Inc. | $8.2B | 70% | 13.3% | 5% | 18% |
| EWEdwards Lifesciences Corporation | $6.1B | 78% | 20.8% | 13% | 22% |
| RMDResmed Inc. | $5.1B | 59% | 32.7% | 26% | 32% |
| DXCMDexcom, Inc. | $4.7B | 60% | 19.6% | 38% | 23% |
| PODDInsulet Corporation | $2.7B | 72% | 17.5% | 17% | 14% |