NEW YORK ( TheStreet) -- Zimmer Holdings Incorporated (NYSE: ZMH) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- ZIMMER HOLDINGS INC has improved earnings per share by 6.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ZIMMER HOLDINGS INC reported lower earnings of $2.97 versus $3.33 in the prior year. This year, the market expects an improvement in earnings ($4.72 versus $2.97).
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The gross profit margin for ZIMMER HOLDINGS INC is currently very high, coming in at 83.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.70% is above that of the industry average.
- ZMH's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ZMH has a quick ratio of 2.44, which demonstrates the ability of the company to cover short-term liquidity needs.
- ZMH's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.