Aug 6, 2021

SOPA Images/LightRocket via Getty Images The stock price of Zimmer Biomet Holdings (NYSE: ZBH) , a medical devices company, reached its all-time high of $178 in April this year, but it has since seen lower levels. A recent sell-off in the stock has led to over a 9% drop in its price over the last five trading days to levels of $148 currently. The recent fall came after the company reduced its lower end of the guidance despite delivering a strong set of results in Q2. Zimmer reported $2.0 billion in sales in Q2 2021, reflecting a strong 65% y-o-y growth, and slightly above the consensus estimate of just under $2.0 billion. Note that in Q2 2020 the sales were significantly impacted due to lockdowns, and Q2 2021 marked a sharp recovery in demand, with a rebound in volume of elective surgeries. Looking at the bottom line, Zimmer reported adjusted EPS of $1.90, compared to just $0.05 in the prior year quarter, and topping the $1.87 consensus estimate. While the company’s Q2 results were good, the widening of its guidance for the full-year didn’t bode well with the investors. Zimmer revised its full-year revenue growth guidance to 14-17%, compared to 14.5-16.5% earlier, and adjusted EPS to be in the range of $7.60 and $8.00, compared to previously provided range of $7.65 to $7.95. That said, the company’s overall business is likely to see strong growth as more people have started visiting doctors and there is a backlog of elective surgeries that will result in higher demand for Zimmer’s products. Now, after a 9% fall in a week, will ZBH stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for ZBH stock average 4.4% in the next one-month (twenty-one trading days) period after experiencing a 9% drop over the previous week (five trading days), implying that ZBH stock may rebound in the near term. But how would these numbers change if you are interested in holding ZBH stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Zimmer Biotech Holdings stock chances of a rise after a fall . You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day! MACHINE LEARNING ENGINE – try it yourself: IF ZBH stock moved by -5% over five trading days, THEN over the next twenty-one trading days ZBH stock moves an average of 3.0%, with a good 69% probability of a positive return over this period. Some Fun Scenarios, FAQs & Making Sense of Zimmer Biomet Holdings Stock Movements: Question 1: Is the average return for Zimmer Biomet Holdings stock higher after a drop? MORE FOR YOU Case 2: Zimmer Biomet Holdings stock rises by 5% or more in a week Is the average return for Zimmer Biomet Holdings stock higher over the subsequent month after Case 1 or Case 2? ZBH stock fares better after Case 1, with an average return of 3% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.9% for Case 2. In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise . Try the Trefis machine learning engine above to see for yourself how Zimmer Biomet Holdings stock is likely to behave after any specific gain or loss over a period. Question 2: Does patience pay? Answer: If you buy and hold Zimmer Biomet Holdings stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you - at least if the company is otherwise strong. Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks! For ZBH stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500: Average Return Trefis You can try the engine to see what this table looks like for Zimmer Biomet Holdings after a larger loss over the last week, month, or quarter. Question 3: What about the average return after a rise if you wait for a while? Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks. It’s pretty powerful to test the trend for yourself for Zimmer Biomet Holdings stock by changing the inputs in the charts above. While ZBH stock may rise in the near term, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Cerner vs. Humana .