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Tiffany & Co. (TIF), Merck & Co., Inc. (MRK), Zimmer Holdings, Inc. (ZMH): These Companies Are Achieving Impressive Returns on Equity and Reducing Debt

And finally

Lastly, medical device manufacturer Zimmer Holdings, Inc. (NYSE:ZMH), which, thanks to the extremely defensive and specialist nature of its operations, has an EBIT margin of nearly 30%. The company’s return-on-equity has been 12.9% on average for the last five years — lower than the other companies in this piece, but with debt set to start falling in 2014, this figure should rapidly improve.

Company EBIT margin, 2012 ROE 5-YR average
Zimmer Holdings 29.70% 12.90%

Zimmer Holdings, Inc. (NYSE:ZMH)’s gearing is forecast to double this year, however, the company is set to get back on-track during 2014, with analysts predicting that gearing will fall to (2)% (net cash position), followed by a fall to (9)% in 2015. With Zimmer Holdings, Inc. (NYSE:ZMH) moving into a net cash balance, investors could be in line for cash returns and a rising stock price akin to the rest of the medical and biotechnology sector.

Conclusion

Overall, these three companies are all producing a strong level of return on equity and have wide profit margins. Additionally, thanks in part to their wide profit margins, gearing and debt is set to fall rapidly over the next few years, which will hopefully lead to financial stability and security to investors knowing that the companies have a solid balance sheet to back up expansion or provide security in times of stress.

The article These Companies Are Achieving Impressive Returns on Equity and Reducing Debt originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool owns shares of Zimmer Holdings. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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