Why Zoetis Stock Is Back In Focus After Simparica Trio Authorization
Zoetis (ZTS) is drawing attention after the U.S. Food and Drug Administration granted Emergency Use Authorization for Simparica Trio to treat New World screwworm infestations in dogs and puppies.
See our latest analysis for Zoetis.
Zoetis shares have picked up short term momentum, with a 1 day share price return of 3.61% and 7 day return of 6.52%. However, the year to date share price return is down 38.27% and the 1 year total shareholder return has declined 48.95%. This points to recent enthusiasm around the Simparica Trio news sitting against a much weaker multi year experience as investors reassess growth prospects after lowered revenue and earnings guidance.
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Zoetis just bounced on the Simparica Trio news, even as guidance and multi year returns reflect pressure. Does that make today’s price an early entry worth considering, or a level to wait out while valuation resets?
Most Popular Narrative: 16.3% Undervalued
The most followed Zoetis narrative puts fair value at $92.92 per share, compared with the last close of $77.73. That gap is what underpins the current undervaluation debate according to ValueInvestingSubstack.
The main reason for the recent collapse in the share price was because they reported that the US Companion Animal segment saw a 11% YoY decline in segment revenues. As that is where they are supposed to be focusing most, given the higher margins and higher defensibility or moat of profits of the Pet segment, it is no surprise that it resulted in a 30% drop in the share price after Q1 earnings.
The narrative’s fair value hangs on a specific recipe: moderate revenue growth, firm profit margins and a P/E profile that treats Zoetis more like a steady compounder than a high flyer. Curious which assumptions really carry the weight in that $92.92 figure.
Result: Fair Value of $92.92 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there are still clear pressure points for the Zoetis story, including the recent 11% revenue drop in the U.S. Companion Animal segment and rising debt-funded buybacks.
Find out about the key risks to this Zoetis narrative.
Next Steps
If this mix of pressure and potential around Zoetis has you thinking, now is the time to review the numbers yourself and decide where you stand. To weigh both the concerns and opportunities, start with the 4 key rewards and 1 important warning sign.
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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.
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