As of July 25, 2023, Zoetis Inc (ZTS, Financial) is witnessing a gain of 3.01%, with its stock price standing at $191.16. The company, with a market cap of $88.3 billion and sales of $8.1 billion, is estimated to be fairly valued, according to the GuruFocus GF Value of $205.36. This valuation is based on critical factors such as historical trading multiples, past performance, and future business growth estimates.
Zoetis, formerly Pfizer's animal health unit, is a leading player in the animal health industry. The company's diverse portfolio includes anti-infectives, vaccines, parasiticides, diagnostics, and other health products for animals. With its revenue almost equally divided between production animals and companion animals, Zoetis has managed to secure the largest market share in the industry.
Understanding the GF Value of Zoetis (ZTS, Financial)
The GF Value, a unique valuation tool by GuruFocus, estimates the fair value of a stock by considering historical trading multiples, past business growth, and future performance estimates. As per this measure, if a stock is trading significantly above the GF Value Line, it is considered overvalued and may offer poor future returns. Conversely, a stock trading significantly below the GF Value Line is likely to provide higher future returns. Currently, Zoetis (ZTS) is fairly valued, indicating that its long-term returns may align with its business growth rate.
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Financial Strength of Zoetis
Investing in companies with robust financial strength can help avoid permanent capital loss. Zoetis's financial strength can be gauged by its cash-to-debt ratio of 0.31, which ranks lower than 68.99% of companies in the Drug Manufacturers industry. This suggests a fair balance sheet for Zoetis, earning it a GuruFocus financial strength rank of 6 out of 10.
Profitability of Zoetis
Profitable companies, especially those with consistent profitability over the long term, are safer investments. Zoetis has been profitable for the past 10 years, with a revenue of $8.1 billion and Earnings Per Share (EPS) of $4.43 in the last twelve months. With its operating margin of 35.42%, Zoetis ranks better than 96.81% of companies in the Drug Manufacturers industry, demonstrating strong profitability.
Growth Prospects of Zoetis
Growth is a critical factor in a company's valuation. Zoetis's 3-year average annual revenue growth is 9.8%, outperforming 62.79% of companies in the Drug Manufacturers industry. Its 3-year average EBITDA growth rate is 12%, surpassing 54.37% of industry peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Zoetis's ROIC of 22.93 outpaces its WACC of 8.45, indicating value creation for shareholders.
Conclusion
In conclusion, the stock of Zoetis Inc (ZTS, Financial) is estimated to be fairly valued. The company exhibits fair financial condition, strong profitability, and commendable growth compared to its industry peers. To delve deeper into Zoetis's financials, check out its 30-Year Financials here.
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