Over the last six months, Zoetis’s shares have sunk to $129.91, producing a disappointing 16.4% loss – a stark contrast to the S&P 500’s 7.2% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now the time to buy ZTS? Find out in our full research report, it’s free.
Originally spun off from Pfizer in 2013 as the world’s largest pure-play animal health company, Zoetis (NYSE:ZTS) discovers, develops, and sells medicines, vaccines, diagnostic products, and services for pets and livestock animals worldwide.
In addition to reported revenue, constant currency revenue is a useful data point for analyzing Branded Pharmaceuticals companies. This metric excludes currency movements, which are outside of Zoetis’s control and are not indicative of underlying demand.
Over the last two years, Zoetis’s constant currency revenue averaged 9.1% year-on-year growth. This performance was solid and shows it can expand steadily on a global scale regardless of the macroeconomic environment.
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Zoetis’s five-year average ROIC was 29.2%, placing it among the best healthcare companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Zoetis’s sales grew at a mediocre 7.2% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the healthcare sector, but there are still things to like about Zoetis.
Zoetis has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 18.4× forward P/E (or $129.91 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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