Should You Buy Zoetis Stock At This Price?
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Zoetis (ZTS) stock trades at 13.5 times earnings, against 22.3 for the median S&P 500 company. The shares lost 29.6% over the past twelve months, and the price appears to assume the company has stopped growing. For the discount to be a gift, Zoetis has to keep its high profit on each sale while its dermatology medicines stop losing sales. So does Zoetis still keep as much of each sale as it did?
Zoetis Still Keeps More Of Each Sale Than Most
Yes. The maker of medicines and vaccines for pets and livestock posted an operating margin of 37.7% over the four quarters ended September 2026, outpacing the 19.0% median for S&P 500 companies. That margin was higher than at 36 of the 40 quarter ends since fiscal Q4 2016, indicating the discount does not come from a business keeping less of each sale.
The stock is cheap on cash flow too. Investors pay 12.4 times Zoetis’s operating cash flow, against 14.9 for the S&P 500 as a whole. One soft spot is net income, the profit behind that earnings multiple: it was $2.51 billion over the latest four quarters, down from $2.63 billion a year earlier, even though operating income rose. Cash from operations also fell, to $2.73 billion from $2.96 billion.
Zoetis’s Sales Have Nearly Stopped Growing
Zoetis posted revenue growth of just 0.9% over the four quarters ended September 2026, lagging the 4.3% average across the latest three twelve-month periods. Revenue expanded 9.3% in the twelve months ended September 2024, then slowed to a 2.8% gain a year later. In fiscal Q3 2026, revenue fell 1.3% from a year earlier.
Zoetis’s dermatology medicines are still losing sales. Key dermatology sales fell 16% worldwide in the quarter, to $396 million, as Apoquel lost share. Separately, generic copies of Convenia and Cerenia kept up the pressure on Zoetis’s U.S. results. The company said growth in livestock and diagnostics only partly offset the pressure on its pet business.
How Is Zoetis Trying To Win Back Pet Sales?
Zoetis is introducing more convenient versions of its pet medicines and offering discounts instead of cutting list prices. Management said the discounts slowed the loss of U.S. dermatology market share to 4 points in fiscal Q3 2026, down from about 7 points in Q2. The company also expects U.S. approval in the fourth quarter for long-acting Cytopoint, a chronic itch treatment.
Management is still projecting a decline. Executives narrowed their fiscal 2026 revenue guidance to a range of $9.22 billion to $9.32 billion, representing an organic fall of 1% to 2%. For 2027, management said it will not assume any improvement in pet owner spending. The company expects limited revenue from its new launches, with their impact building later in the year and into 2028.
What Is A Zoetis Buyer Betting On?
Investors buying at this price are betting that Zoetis fixes a real sales problem, rather than simply betting the market has overlooked a sound business. The company’s profit on each sale has held up. Its dermatology medicines continue to lose market share, albeit more slowly, and management expects its new product launches to add little revenue until late 2027.
If dermatology keeps shrinking, a buyer owns a highly profitable business that has stopped growing, which is what the price appears to assume already. Zoetis is expected to report its fourth quarter in February 2027, and its dermatology sales against a year earlier are the number to watch.
Does This Mean You Should Act On ZTS?
Betting on a single stock is always risky, whichever way you lean. The Trefis High Quality (HQ) Portfolio holds 30 quality companies in equal weight and has returned 105% since its September 2020 launch.
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