ZTS Zoetis
Market prices Zoetis as a broken franchise; it is a slower-growing but still dominant cash machine.
The story
Zoetis is the global leader in animal health. Its moat comes from a broad portfolio across companion animals and livestock, deep relationships with veterinarians, and manufacturing scale. The business is mature but still growing. The near-term overhang is companion-animal franchise pressure: Apoquel and Simparica face competition, and Librela's safety debate is dampening dermatology and pain growth. The stock has fallen from 77.5 to 70.3 with no new fundamental break, which looks like sentiment continuing to de-rate a still highly profitable franchise.
I kept last month's drivers because no material facts changed. The one change is a small trim to year-1 growth (4.0% to 3.5%), since TTM revenue of 9.52B is only about 0.5% above the last fiscal year and shows the companion-animal slowdown. Target margin stays at 35%, just below the recent 36-38% range, to allow for competitive pricing pressure and generic erosion. Beta stays near the industry anchor, and failure risk stays low given 2.6B of net income against 6.7B of net debt.
Value drivers
| Revenue growth (Y1) | 3.5% |
| Terminal growth | 3.0% |
| Forecast horizon | 7y |
| Target operating margin | 35.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.77 |
| Beta | 1.00 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 8.7% |
| Terminal WACC | 8.7% |
Valuation bridge
| PV of explicit FCFF | 13.23B |
| PV of terminal value | 26.50B |
| Equity value | 32.34B |
| ÷ shares → per share | $78.26 |
News
neutral -0.10 · 8 articles
- Zoetis (ZTS) Registers a Bigger Fall Than the Market: Important Facts to Note
- 'Big Short' Michael Burry Tunes Out AI ‘Woo-Hoos’ — Finds Opportunity In Copper, QXO And 3 More Stocks
- 1 Mid-Cap Stock with Exciting Potential and 2 We Turn Down
- Zoetis (ZTS) Stock Drops Despite Market Gains: Important Facts to Note
- Zoetis (ZTS) Stock Fair Value Falls After Mixed Analyst Cuts And Softer Growth Views
- Zoetis Stands by Guidance as Pet-Care Weakness and Competition Pressure Sales
- Michael Burry Sells FLUT To Pile Into LULU Under $100 — Plus A New Bet On ZTS
- 1 Oversold Stock Ready to Bounce Back and 2 Facing Challenges
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 9.85B | 3.5% | 36.5% | 2.86B | 432.59M | 2.43B | 2.23B |
| 2 | 10.19B | 3.4% | 36.1% | 2.93B | 437.07M | 2.49B | 2.11B |
| 3 | 10.53B | 3.3% | 35.8% | 2.99B | 440.98M | 2.55B | 1.99B |
| 4 | 10.87B | 3.2% | 35.4% | 3.06B | 444.29M | 2.61B | 1.87B |
| 5 | 11.21B | 3.2% | 35.0% | 3.12B | 446.96M | 2.68B | 1.76B |
| 6 | 11.56B | 3.1% | 35.0% | 3.22B | 448.98M | 2.77B | 1.68B |
| 7 | 11.90B | 3.0% | 35.0% | 3.31B | 450.32M | 2.86B | 1.60B |
Key risks
- Librela/Solensia safety concerns widen and weaken the monoclonal antibody pain franchise
- Competitors in dermatology and parasiticides (Apoquel and Simparica rivals) force price cuts and share loss
- Veterinary clinic visits weaken further as pet owners' finances tighten, keeping growth below 4%
Catalysts
- Quarterly results showing stabilization in companion-animal revenue and Librela trends
- Continued buybacks at depressed prices, plus pipeline approvals such as long-acting mAbs and next-gen parasiticides