Zoetis Inc. (ZTS): A Bull Case Theory

We came across a bullish thesis on Zoetis Inc. on Summit Stocks’s Substack. In this article, we will summarize the bulls’ thesis on ZTS. Zoetis Inc.'s share was trading at $142.26 as of October 13th. ZTS’s trailing and forward P/E were 25.21 and 21.69 respectively according to Yahoo Finance.

Zoetis is the global leader in animal pharmaceuticals, recognized for its high-quality, durable business model and consistent outperformance in the animal health sector. The industry benefits from strong secular tailwinds, including the deepening human-animal bond, longer pet lifespans, recurring cash-based demand, and faster, lower-cost R&D compared with human pharmaceuticals. Zoetis has capitalized on these advantages, consistently outgrowing peers for over a decade, yet its shares have lagged the broader market, down roughly 11% over five years and 40% from the January 2022 peak, despite record revenue, profit, and free cash flow growth, coupled with robust capital returns and rising returns on capital.

Zoetis’s origins trace back to Pfizer, with its dedicated animal health division discovering Terramycin in 1950, still in use today. Following multiple decades of development and strategic acquisitions, Zoetis spun off from Pfizer in 2013, becoming the world’s largest publicly traded animal health company. Its business spans companion animals—dogs, cats, horses—and livestock, with a diversified portfolio across parasiticides, vaccines, dermatology, anti-infectives, pain management, and diagnostics. The company’s top ten products contribute 55% of 2024 revenue, led by Simparica/Simparica Trio and Apoquel, which generate recurring demand due to chronic treatment and preventive use.

Zoetis derives 55% of revenue from the U.S., primarily from pets, and is expanding globally, with emerging markets in China, Brazil, and Africa providing significant growth opportunities. Its companion animal focus offers higher margins, pricing power, and less cyclical demand than livestock. Continuous R&D investment ensures ongoing innovation, with patent cliffs posing limited risk due to fragmented markets, strong brand trust, and entrenched veterinarian and owner loyalty. The result is remarkable product longevity, with many top drugs remaining relevant and growing decades post-exclusivity, highlighting Zoetis’s resilient and highly attractive investment profile.

Previously we covered a bullish thesis on Zoetis Inc. (ZTS) by Best Anchor Stocks in December 2024, which highlighted the company’s growth from its OA pain MAB franchise, strong performance in Simparica and Dermatology, and market leadership in animal health. The company's stock price has depreciated approximately by 13.62% since our coverage. The thesis still stands as Zoetis benefits from secular tailwinds and resilient product demand. Summit Stocks shares a similar perspective but emphasizes Zoetis’s long-term evolution and diversified portfolio.

Zoetis Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 75 hedge fund portfolios held ZTS at the end of the second quarter which was 74 in the previous quarter. While we acknowledge the potential of ZTS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.