Zoetis Inc (ZTS, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $187.5, Zoetis Inc has witnessed a surge of 2.56% over a period, marked against a three-month change of 14.06%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Zoetis Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of Zoetis Inc's GF Score:
- 1. Financial strength rank: 6/10
- 2. Profitability rank: 10/10
- 3. Growth rank: 10/10
- 4. GF Value rank: 6/10
- 5. Momentum rank: 9/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high profitability rank and a slightly lower financial strength rank, GuruFocus assigned Zoetis Inc the GF Score of 97 out of 100, which signals the highest outperformance potential.
Understanding Zoetis Inc's Business
Zoetis Inc, with a market cap of $86.31 billion and sales of $8.22 billion, is a leading player in the animal health industry. The company sells anti-infectives, vaccines, parasiticides, diagnostics, and other health products for animals. The firm earns slightly less than half of total revenue from production animals (cattle, pigs, poultry, and so on), and more than half from companion animal (dogs, horses, cats) products. Its U.S. business is heavily skewed toward companion animals, while its international business is slightly skewed toward production animals. The firm has the largest market share in the industry and was previously Pfizer's animal health unit. With an operating margin of 36.18%, Zoetis Inc demonstrates a strong profitability profile.
Financial Strength Breakdown
According to the Financial Strength rating, Zoetis Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Zoetis Inc stands impressively at 12.61, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 8.22, Zoetis Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.82, Zoetis Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Zoetis Inc's impressive standing among its peers in generating profit. Zoetis Inc's Operating Margin has increased (12.22%) over the past five years, as shown by the following data: 2018: 32.29; 2019: 32.24; 2020: 33.99; 2021: 36.05; 2022: 36.24. Furthermore, Zoetis Inc's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 67.19; 2019: 68.18; 2020: 69.18; 2021: 70.38; 2022: 69.63. This trend underscores the company's growing proficiency in transforming revenue into profit. Zoetis Inc's strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Zoetis Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 9.8%, which outperforms better than 62.79% of 911 companies in the Drug Manufacturers industry. Moreover, Zoetis Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 12, and the rate over the past five years is 12.7. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Zoetis Inc's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the importance of comprehensive financial evaluation in identifying investment opportunities with high return potential. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
