High Margins, Lower Price: Is Zoetis Stock a Buy?

Zoetis (ZTS) stock deserves your consideration. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price

Here is what’s going well for the company. Third quarter 2025 saw livestock organic operational revenue increase 10% from vaccine demand and deeper penetration among key accounts. The Simparica franchise also expanded 7% operationally, driven by Simparica Trio’s 6% growth. While overall organic revenue growth was 4%, the 9% organic increase in adjusted net income reflects effective cost management. New approvals like Lenivia for canine osteoarthritis pain and Vanguard Recombishield vaccine expand future offerings. Though full-year revenue guidance was narrowed due to macro trends and moderated clinic visits, causing a temporary stock decline, efforts are underway to stabilize the OA pain portfolio and drive 2026 growth with new product launches.

So what does this translate to? Let’s talk numbers

• Revenue Growth: Zoetis saw growth of 2.7% LTM and 5.5% last 3 year average, but this is not a growth story
• Recent Profitability: Nearly 31.0% operating cash flow margin and 37.6% operating margin LTM.
• Long-Term Profitability: About 29.8% operating cash flow margin and 36.8% operating margin last 3 year average.
• Available At Discount: At P/S multiple of 5.7, ZTS stock is available at a 35% discount vs 1 year ago.

While revenue growth helps, this is not a growth perspective. Pricing power and high margins generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. Market tends to reward that.

Below is a quick comparison of ZTS fundamentals with S&P medians.

*LTM: Last Twelve Months

If you want more details, read Buy or Sell ZTS Stock. Nevertheless, we know that clients love their favorite stocks, but single-stock risk can undo years of gains. Savvy financial advisors diversify intelligently – learn how our Boston-based wealth management partner can help.

Stocks Like These Can Outperform. Here Is Data

Here is how we make the selection: We consider stocks > $10 Bil in market cap, and then include those with high CFO (cash flow from operations) margins or operating margins. We additionally consider only those stocks that have meaningfully declined in valuation over the past 1 year.

Below are statistics for stocks with this selection strategy applied since 12/31/2016.

• Average 12-month forward returns of nearly 19%
• 12-month win rate (percentage of picks returning positive) of about 72%

In summary, we select stocks that have dropped, despite apparently healthy fundamentals – so useful to consider, what is the risk?

Risk Quantified

ZTS isn’t immune to big drops. It slid about 17% in the 2018 correction, 36% during the Covid pandemic, and nearly 47% in the inflation shock. Even with strong fundamentals, the stock can still take a serious hit when the market turns sour. Good quality cushions risk but doesn’t erase it.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ZTS Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.