On April 22, 2026, we delve into the DCF analysis for Zoetis Inc ZTS, a company that has experienced a challenging year with its stock price down 18.3% over the past year. The current price stands at $118.18, and the market cap is approximately $49.7 billion.
- DCF Earnings-based intrinsic value of $134.17 vs price of $118.18 (margin of safety: 11.9%)
- DCF FCF-based intrinsic value of $127.35 vs price of $118.18 (second opinion: fair valued)
- GF Scoreâ„¢ of 89/100 indicating high reliability of the DCF inputs
What Is ZTS Worth? DCF Earnings-Based Model
The DCF earnings-based model evaluates Zoetis Inc's intrinsic value based on projected earnings growth over the next decade. The model assumes a current EPS of $6.42, with an expected growth rate of 14.0% annually for the first ten years. After this growth phase, a terminal growth rate of 4% is applied for the subsequent ten years.
| Parameter | Value |
|---|---|
| Current EPS (TTM, excl. non-recurring) | $6.42 |
| 10-Year Growth Rate | 14.0% |
| 10-Year Treasury Rate | 4.28% |
| Discount Rate (ceil(Treasury) + 6%) | 11% |
| Terminal Growth Rate | 4% |
The two-stage model consists of a growth phase followed by a terminal phase. The growth stage values the company based on the projected earnings growth, while the terminal stage accounts for the expected growth beyond the initial decade.
| Stage | Description | Value |
|---|---|---|
| Growth Stage (Years 1-10) | EPS growing at 14.0%, discounted at 11% | $74.56 |
| Terminal Stage (Years 11-20) | 4% terminal growth, discounted at 11% | $59.61 |
| Intrinsic Value | Growth + Terminal | $134.17 |
With a current price of $118.18 compared to an intrinsic value of $134.17, Zoetis Inc appears modestly undervalued, offering a margin of safety of 11.9%. It is important to note that GuruFocus uses EPS without non-recurring items, as research indicates that stock prices correlate more closely with earnings than with free cash flow. For further details, visit the ZTS DCF Calculator.
What Does the Free Cash Flow DCF Say?
The alternative DCF model based on free cash flow (FCF) yields an intrinsic value of $127.35. When comparing this FCF-based valuation to the earnings-based intrinsic value of $134.17, we find that both models suggest a positive outlook for Zoetis Inc, although the FCF model indicates a fair valuation with a margin of safety of 7.2%.
How Does GF Valueâ„¢ Compare to the DCF Models?
The GF Valueâ„¢ for Zoetis Inc is calculated at $198.59, providing a third perspective on the company's valuation. GF Valueâ„¢ is GuruFocus' proprietary measure derived from historical trading multiples, past business growth, and future performance estimates. While the DCF models suggest that the stock is either modestly undervalued or fairly valued, the GF Valueâ„¢ indicates that the stock is significantly undervalued, highlighting a discrepancy among the valuation models. For more information, visit the GF Valueâ„¢ page.
What Does ZTS's GF Scoreâ„¢ Tell Us?
The GF Scoreâ„¢ ranks stocks from 0 to 100 based on five key aspects: Financial Strength, Profitability, Growth, Valuation, and Momentum. Stocks with higher GF Scoreâ„¢ values have been shown to generate higher long-term returns based on backtesting from 2006 to 2021.
| Metric | Rating |
|---|---|
| GF Scoreâ„¢ | 89/100 |
| Financial Strength | 6/10 |
| Profitability | 10/10 |
| Growth | 9/10 |
| Valuation | 4/10 |
| Momentum | 4/10 |
With a predictability rank of 2 out of 5 stars, it is important to recognize that higher predictability ratings enhance the reliability of the DCF model for this stock. For more insights, visit the ZTS stock page.
Key Assumptions and Limitations
It is crucial to understand that DCF models are highly sensitive to the assumptions made regarding growth rates and discount rates. Stocks with low predictability ratings, such as Zoetis Inc, tend to produce less reliable DCF estimates. Additionally, the terminal growth rate of 4% is a simplifying assumption that may not reflect future economic conditions accurately.
What This Means for Investors
In summary, the DCF earnings model suggests that Zoetis Inc is modestly undervalued, while the FCF model indicates a fair valuation. The GF Valueâ„¢ provides a more optimistic view, suggesting significant undervaluation. Overall, the consensus points towards a modest undervaluation of the stock. For the full DCF analysis, visit the ZTS DCF Calculator. You can also explore the GF Valueâ„¢ page, or use the GuruFocus Stock Screener to find undervalued predictable companies.
Frequently Asked Questions
What is ZTS's intrinsic value based on DCF?
Answer: earnings-based $134.17, FCF-based $127.35
Is ZTS overvalued or undervalued?
Answer: The consensus suggests modest undervaluation based on DCF and significant undervaluation based on GF Valueâ„¢.
How reliable is the DCF model for ZTS?
Answer: The predictability rank of 2/5 indicates that the DCF model may be less reliable for this stock.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
