Over the last six months, Zoetis’s shares have sunk to $153.39, producing a disappointing 11.4% loss - a stark contrast to the S&P 500’s 5.8% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now an opportune time to buy ZTS? Find out in our full research report, it’s free.
Why Does ZTS Stock Spark Debate?
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.
Two Things to Like:
1. Constant Currency Revenue Drives Growth
Investors interested in Branded Pharmaceuticals companies should track constant currency revenue in addition to reported revenue. 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. 
2. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Zoetis’s five-year average ROIC was 28.8%, 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.
One Reason to be Careful:
Lackluster Revenue Growth
Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. Zoetis’s annualized revenue growth of 7.1% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. 
Final Judgment
Zoetis has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 24.8× forward P/E (or $153.39 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Zoetis
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