Smith & Nephew (NYSE:SNN) and Zimmer Biomet (NYSE:ZBH) are both large-cap medical companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.
Earnings & Valuation
This table compares Smith & Nephew and Zimmer Biomet's revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Smith & Nephew | $5.14 billion | 3.34 | $600 million | $2.04 | 19.17 |
| Zimmer Biomet | $7.98 billion | 4.39 | $1.13 billion | $7.87 | 21.39 |
Zimmer Biomet has higher revenue and earnings than Smith & Nephew. Smith & Nephew is trading at a lower price-to-earnings ratio than Zimmer Biomet, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a summary of current ratings and target prices for Smith & Nephew and Zimmer Biomet, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Smith & Nephew | 2 | 4 | 6 | 0 | 2.33 |
| Zimmer Biomet | 1 | 3 | 16 | 3 | 2.91 |
Smith & Nephew presently has a consensus target price of $47.1667, suggesting a potential upside of 20.63%. Zimmer Biomet has a consensus target price of $165.5909, suggesting a potential downside of 1.62%. Given Smith & Nephew's higher possible upside, equities research analysts clearly believe Smith & Nephew is more favorable than Zimmer Biomet.
Profitability
This table compares Smith & Nephew and Zimmer Biomet's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Smith & Nephew | N/A | N/A | N/A |
| Zimmer Biomet | 0.52% | 10.07% | 4.93% |
Dividends
Smith & Nephew pays an annual dividend of $0.90 per share and has a dividend yield of 2.3%. Zimmer Biomet pays an annual dividend of $0.96 per share and has a dividend yield of 0.6%. Smith & Nephew pays out 44.1% of its earnings in the form of a dividend. Zimmer Biomet pays out 12.2% 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. Smith & Nephew has increased its dividend for 1 consecutive years and Zimmer Biomet has increased its dividend for 1 consecutive years.
Risk & Volatility
Smith & Nephew has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500. Comparatively, Zimmer Biomet has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500.
Insider and Institutional Ownership
8.9% of Smith & Nephew shares are held by institutional investors. Comparatively, 87.2% of Zimmer Biomet shares are held by institutional investors. 1.0% of Smith & Nephew shares are held by insiders. Comparatively, 0.4% of Zimmer Biomet shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Summary
Zimmer Biomet beats Smith & Nephew on 14 of the 17 factors compared between the two stocks.
