Carl Zeiss Meditec: Navigating Earnings Volatility and Valuation Opportunities

In the ever-evolving landscape of medical technology, Carl Zeiss Meditec AG (AFX.DE) has long been a beacon of innovation. However, recent earnings reports have sparked a critical debate: Is the stock's current undervaluation, coupled with long-term growth forecasts, enough to justify a buy despite short-term headwinds? Let's dissect the numbers, risks, and opportunities to determine whether this German medtech giant is a compelling investment.

Earnings Performance: A Tale of Two Quarters

Carl Zeiss Meditec's Q2 2025 results were a bright spot, with revenue surging 17.9% to €560 million, driven by a rebound in China's refractive surgery market and a strategic shift toward higher-margin SMILE procedures. EBITA soared 42% above consensus estimates, and the Ophthalmology segment alone contributed €432 million in revenue—a 23.6% year-over-year increase. These figures underscore the company's resilience in key markets.

Yet, the third-quarter earnings report painted a more nuanced picture. While revenue met expectations at €549.6 million, statutory EPS of €0.32 fell 28% below analyst forecasts, triggering a 7% stock price drop. The CEO, Dr. Markus Weber, attributed this to macroeconomic uncertainties, including U.S. trade tariffs and currency volatility. The company maintained its full-year guidance of “moderate revenue growth” and “stable to slightly higher EBITA,” signaling caution but not alarm.

Valuation Metrics: A Discounted Premium

The stock's current valuation appears to reflect both optimism and caution. As of August 2025, Carl Zeiss Meditec trades at a P/E ratio of 24.32, a sharp decline from its 10-year average of 43.44 and well below peers like Sartorius AG (93.61) and Nemetschek SE (84.45). This suggests the market is pricing in a more conservative growth trajectory.

The price-to-book ratio of 1.953 further indicates a moderate premium to tangible assets, a reasonable level for a company with a strong R&D-driven business model. However, the PEG ratio of 2.56, based on 5-year EBITDA growth, raises questions about whether the stock is overvalued relative to its historical growth.

Critically, forward-looking metrics tell a different story. Analysts project 2026 EPS of €2.25, a 24.87% increase from 2025 estimates. Using this growth rate, the forward P/E of 17.96 and a recalculated PEG ratio of ~1.18 suggest the stock could be undervalued if these forecasts materialize.

Growth Potential: Innovation vs. Macro Risks

The company's long-term prospects hinge on its ability to capitalize on two key drivers:
1. Ophthalmology Dominance: The Ophthalmology segment's 9.5% revenue growth in the first nine months of 2024/25, fueled by the DORC acquisition and strong demand in China and North America, positions it as a growth engine.
2. Microsurgery Expansion: The KINEVO® 900 S and other neurosurgical innovations are gaining traction, with the Microsurgery segment posting 1.6% revenue growth.

However, macroeconomic risks loom large. The 15% U.S. trade tariffs on European imports could erode margins, though the company plans to offset this with pricing strategies. Currency fluctuations in Asia and the U.S. also pose challenges, particularly in markets where price sensitivity is high.

Investment Thesis: A Calculated Bet

For long-term investors, Carl Zeiss Meditec presents a compelling case. The stock's current valuation discounts many of its historical growth metrics, and the forward PEG ratio suggests potential upside if the company meets 2026 EPS targets. Additionally, its leadership in high-margin ophthalmic procedures and a robust product pipeline provide a moat against competition.

Yet, short-term volatility remains a concern. The earnings miss in Q3 and downward revisions to 2026 revenue forecasts (from €2.34B to €2.32B) highlight the fragility of growth in a saturated market. Investors must weigh the company's ability to navigate trade tensions and currency risks against its innovation-driven revenue streams.

Conclusion: Buy with Caution

Carl Zeiss Meditec's stock is a paradox: undervalued on paper but exposed to near-term macroeconomic turbulence. For those with a 3–5 year horizon and a tolerance for volatility, the current price offers an entry point to tap into its long-term growth potential. However, the path to value realization is not without hurdles.

Final Verdict: A conditional buy for investors who believe the company can execute its pricing strategies, mitigate trade risks, and sustain innovation in its core markets. Monitor the Q4 earnings and 2026 guidance updates closely—these will be pivotal in determining whether the stock's fundamentals align with its valuation.