On July 21, 2023, Zoetis Inc (ZTS, Financial) saw a positive change in its stock price by 6.93%, closing at $183.51. With a market capitalization of $84.8 billion and sales amounting to $8.1 billion, Zoetis Inc (ZTS) is a key player in the Drug Manufacturers industry. According to GuruFocus, the GF Value of Zoetis (ZTS) stands at $205.01, indicating that the stock is modestly undervalued.
Zoetis, previously Pfizer's animal health unit, is a leading firm in the animal health sector. The company's portfolio includes anti-infectives, vaccines, parasiticides, diagnostics, and other health products for animals. The U.S. business leans towards companion animals, while its international business tilts slightly towards production animals.
GF Value of Zoetis (ZTS, Financial)
The GF Value is a unique metric that estimates a stock's intrinsic worth. It uses historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. If the stock price is significantly above the GF Value Line, the stock may be overvalued. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued. At its current price, Zoetis (ZTS) is considered modestly undervalued.
Given Zoetis's current undervaluation, it's likely that the long-term return of its stock will outpace its business growth.
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Financial Strength and Profitability of Zoetis (ZTS, Financial)
Investing in companies with low financial strength could result in permanent capital loss. Zoetis has a cash-to-debt ratio of 0.31, which ranks worse than 69.17% of companies in the Drug Manufacturers industry. This suggests a fair balance sheet.
Profitability is another crucial factor. Zoetis has been profitable for 10 out of the past 10 years, with an operating margin of 35.42%, better than 96.91% of companies in the industry. This indicates strong profitability.
Growth and ROIC vs WACC of Zoetis (ZTS, Financial)
Growth is a vital factor in a company's valuation. Zoetis’s 3-year average revenue growth rate is better than 62.72% of companies in the Drug Manufacturers industry. Another way to evaluate profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Over the past 12 months, Zoetis’s ROIC was 22.93, while its WACC came in at 8.39.
Conclusion
Overall, Zoetis (ZTS, Financial) stock is believed to be modestly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 54.31% of companies in the Drug Manufacturers industry. To learn more about Zoetis stock, you can check out its 30-Year Financials here.
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