Critical Analysis: Zimmer Biomet (NYSE:ZBH) versus Inspire Medical Systems (NYSE:INSP)

Inspire Medical Systems (NYSE:INSP) and Zimmer Biomet (NYSE:ZBH) are both healthcare companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Inspire Medical Systems and Zimmer Biomet, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Inspire Medical Systems	3	13	3	1	2.10
Zimmer Biomet	1	16	7	0	2.25

Inspire Medical Systems currently has a consensus target price of $71.24, indicating a potential upside of 4.95%. Zimmer Biomet has a consensus target price of $105.68, indicating a potential downside of 3.56%. Given Inspire Medical Systems’ higher probable upside, analysts clearly believe Inspire Medical Systems is more favorable than Zimmer Biomet.

Valuation and Earnings

This table compares Inspire Medical Systems and Zimmer Biomet”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Inspire Medical Systems	$911.98 million	2.16	$145.42 million	$4.62	14.69
Zimmer Biomet	$8.51 billion	2.46	$705.20 million	$4.11	26.66

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Inspire Medical Systems	11.43%	7.32%	6.39%
Zimmer Biomet	9.48%	13.12%	7.23%

Volatility and Risk

Inspire Medical Systems has a beta of 0.67, suggesting that its share price is 33% less volatile than the S&P 500. Comparatively, Zimmer Biomet has a beta of 0.5, suggesting that its share price is 50% less volatile than the S&P 500.

Institutional & Insider Ownership

94.9% of Inspire Medical Systems shares are owned by institutional investors. Comparatively, 88.9% of Zimmer Biomet shares are owned by institutional investors. 2.2% of Inspire Medical Systems shares are owned by insiders. Comparatively, 1.3% of Zimmer Biomet shares are owned 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.

Summary

Zimmer Biomet beats Inspire Medical Systems on 8 of the 15 factors compared between the two stocks.

About Inspire Medical Systems

Inspire Medical Systems, Inc., a medical technology company, focuses on the development and commercialization of minimally invasive solutions for patients with obstructive sleep apnea (OSA) in the United States and internationally. The company offers Inspire system, a neurostimulation technology that provides a safe and effective treatment for moderate to severe OSA. It also develops a novel, closed-loop solution that continuously monitors a patient's breathing and delivers mild hypoglossal nerve stimulation to maintain an open airway. The company was incorporated in 2007 and is headquartered in Golden Valley, Minnesota.

About Zimmer Biomet

Zimmer Biomet Holdings, Inc., together with its subsidiaries, operates as a medical technology company worldwide. The company designs, manufactures, and markets orthopedic reconstructive products, such as knee and hip products; S.E.T. products, including sports medicine, biologics, foot and ankle, extremities, and trauma products; craniomaxillofacial and thoracic products comprising 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 robotic, surgical, and bone cement products. 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 orthopedic surgeons, neurosurgeons, 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.