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Zoetis (ZTS) Valuation Check as Innovation Day, Dividend Hike and New Feline Drug Shape Growth Outlook

Simply Wall St · 1d ago

Zoetis (ZTS) just packed a lot into a short stretch, from showcasing a fuller innovation pipeline to lifting its dividend and winning Canadian approval for a new feline pain treatment, all suggesting potential for steadier long term earnings power.

See our latest analysis for Zoetis.

Even with Pipeline Day buzz, a higher dividend and fresh regulatory wins for Portela, the 1 year total shareholder return is still down 32.5%, and the 5 year total shareholder return is negative. This suggests that expectations have reset but could rebuild as those growth drivers start to show up in earnings.

If Zoetis has you rethinking healthcare defensives, it may be worth exploring other high quality names by screening for healthcare stocks that fit your risk and return profile.

With earnings still growing and the share price trading at roughly a one third discount to both intrinsic value estimates and analyst targets, is Zoetis quietly undervalued here, or is the market already discounting that future growth?

Most Popular Narrative: 30.2% Undervalued

With Zoetis last closing at $118.66 against a most popular narrative fair value of about $169.96, the valuation gap hinges on steady growth, rising margins and a richer earnings multiple over time.

Ongoing innovation and accelerated R&D output, with expectations for a major new product approval in a key market every year over the next few years, positions Zoetis to expand addressable markets, launch higher margin products, and protect market share positively impacting organic revenue growth and net margins.

Read the complete narrative.

Want to see what kind of revenue runway, margin lift and future earnings multiple this narrative is baking in for Zoetis? The detailed assumptions might surprise you.

Result: Fair Value of $169.96 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, mounting competition in key franchises and lingering concerns over OA pain therapies could easily blunt those optimistic growth and valuation assumptions.

Find out about the key risks to this Zoetis narrative.

Build Your Own Zoetis Narrative

If you see Zoetis differently or want to stress test the numbers yourself, you can build a personalized thesis in just minutes using Do it your way.

A great starting point for your Zoetis research is our analysis highlighting 6 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.