ZTS Stock Study (3-11-26)

Posted by Mark on September 19, 2025 at 07:28 | Last modified: March 11, 2026 09:58

I recently did a stock study on Zoetis Inc. (ZTS, $120.49).

M* writes:

     > Zoetis sells anti-infectives, vaccines, parasiticides,
     > diagnostics, and other health products for animals. The
     > firm earns roughly 35% of total revenue from production
     > animals (cattle, pigs, poultry, and so on) and nearly 65%
     > from companion animal (dogs, horses, cats) products. Its
     > USA business is skewed even more heavily toward
     > companion animals, while its international business is
     > slightly skewed toward production animals. The firm has
     > the largest market share in the industry and was
     > previously Pfizer’s animal health unit.

Over the past decade, this medium-size company grows sales and EPS at annualized rates of 8.0% and 15.4%, respectively. Lines are up, straight, and parallel. Value Line (VL) gives an Earnings Predictability score of 100. Shares outstanding decrease 10.9% (1.3%/year).

Over the past decade, PTPM leads peer and industry averages while increasing from 25.1% to 35.5% (’25) with a last-5-year mean of 33.7%. ROE leads peer and industry averages while ranging from 42.8% in ’17 to 66.3% in ’18 with a last-5-year mean of 45.6%. Debt-to-Capital is greater than peer and industry averages while ranging from 57.5% in ’23 to 75.0% in ’16 with a last-5-year mean of 62.8%.

Quick Ratio is 1.75 and Interest Coverage 16.1 per M* who assigns “Wide” Economic Moat, “Exemplary” rating for Capital Allocation, and a B grade for Financial Health (per BetterInvesting® website). VL rates the company A for Financial Strength.

With regard to sales growth:

• YF gives YOY ACE 4.7% and 5.0% for ’26 and ’27 (based on 17 analysts).
• Zacks gives YOY ACE 4.7% and 5.2% for ’26 and ’27, respectively (9 analysts).
• VL gives 5.2% per year from ’24-’29.
• CFRA gives ACE 5.6% YOY and 5.1% per year for ’26 and ’25-’27, respectively.
• M* gives 2-year ACE of 4.2% per year and projects 5-year annualized 4.5% in Equity Report.

I am forecasting below the range at 4.0% per year.

With regard to EPS growth:

• MarketWatch projects 8.6% and 8.8% per year for ’25-’27 and ’25-’28, respectively (based on 23 analysts).
• Nasdaq.com gives ACE 7.8% and 6.7% per year for ’26-’28 and ’26-’29 (9 / 7 / 2 analysts for ’26 / ’28 / ’29).
• Seeking Alpha projects 4-year annualized of 8.0%.
• Finviz gives ACE 5-year annualized of 8.4% (8).
• Argus gives 5-year annualized of 11.0%.
• LSEG projects LTG of 7.8%.
• YF gives YOY ACE 9.6% and 7.8% for ’26 and ’27, respectively (15).
• Zacks gives YOY ACE 8.7% and 7.8% for ’26 and ’27, respectively, and 5-year annualized of 9.3% (11).
• VL gives 6.7% annualized from ’24-’29.
• CFRA projects 9.7% YOY and 7.7% per year for ’26 and ’25-’27 along with 3-year CAGR of 8.0%.
• M* gives ACE long-term 8.8%/year and projects 9.4% annualized from ’24-’29 in Equity Report.

My 6.0% forecast is below the long-term-estimate range (mean of eight: 8.7%). Initial value is ’25 EPS of $6.02/share.

My Forecast High P/E is 29.0. Over the past 10 years, high P/E ranges from 29.5 in ’25 to 58.4 in ’21 with a last-5-year mean of 43.7 and last-5-year-mean average P/E of 35.3. I am below the range.

My Forecast Low P/E is 15.0. Over the past 10 years, low P/E ranges from 19.1 in ’25 to 33.1 in ’21 with a last-5-year mean of 26.9. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $90.30 is default based on initial value from above. This is 25.1% less than previous close and 21.7% less than 52-week low.

Over the past 10 years, Payout Ratio (PR) increases from 23.0% to 33.2% (’25) with a last-5-year mean of 29.4%. I am forecasting below the range at 17.0%.

These inputs land ZTS in the BUY zone with a U/D ratio of 3.8. Total Annualized Return (TAR) is 15.2%.

PAR (using Forecast Average—not High—P/E) of 9.4% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with Member Sentiment (MS). Based on 156 studies done in the past 90 days (my study and 62 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 4.7%, 7.2%, 30.0, 20.0, and 27.4% respectively. I am lower across the board. VL [M*] projects a future average P/E of 25.0 [14.0, which seems unreasonably low] that is equal to MS and greater than mine (22.0).

MS high / low EPS are $8.45 / $5.87 versus my $8.06 / $6.02 (per share). My high EPS is less due to a lower growth rate. VL (M*) high EPS of $8.20 ($8.34) is in the middle.

MS LSPF of $108.50 implies a Forecast Low P/E of 18.5: less than the above-stated 20.0. MS LSPF is 7.6% greater than the default $5.87/share * 20.0 = $117.40 that results in more conservative zoning. MS LSPF exceeds mine by 20.2%, however.

MOS is robust in the study because my inputs are less than historical/analyst/MS averages/ranges. Also backing this assessment is MS TAR exceeding mine by 1.6% per year and my lower LSPF.

Regarding valuation, PEG is 1.9 and 3.1 per Zacks and my projected P/E, respectively: a bit overvalued (M* has 1.7). Relative Value [(current P/E) / 5-year-mean average P/E] is exceedingly low at 0.57. M* has stock trading at a 29% discount.

Some would argue this is not a high-quality growth stock because forecast growth rates are less than 9.0%-10.0%. I don’t adhere to these criteria and have faced some criticism over it. One good thing about the BetterInvesting® methodology is some room for subjectivity. Indeed, we don’t have sufficient data or studies necessary to prove any is one best answer.

Per U/D, ZTS is a BUY under $126/share. BetterInvesting® TAR criterion would be met [233.7 / ((13.87 / 100 ) +1 ) ^ 5]
~ $122 given a forecast high price ~$234.

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