Zoetis(ZTS) The Motley Fool·2025-02-23 13:00Core Viewpoint - Zoetis is highlighted as a feel-good stock with market-beating potential, especially following a significant drop in share price, making it an attractive investment opportunity [1][3][14] Group 1: Company Overview - Zoetis specializes in animal healthcare, providing medicines, vaccines, diagnostics, and precision health products for both companion animals and livestock [4] - The company has consistently outperformed the overall animal healthcare industry since 2014, driven by continuous innovation [4] - Approximately 55% of sales come from the United States, while 45% are generated internationally [7] Group 2: Product Innovation and Growth - The introduction of new osteoarthritis treatments, Librela and Solensia, has led to an 80% increase in sales in 2024, making them the company's fourth-largest franchise [5][6] - With a significant portion of pets likely to develop osteoarthritis, these products have substantial growth potential as pet owners increasingly invest in their pets' health [6] Group 3: Financial Performance - Zoetis has seen its net profit margin more than triple since 2012, with a return on invested capital (ROIC) of 21%, placing it in the top quintile of the S&P 500 [9] - The company's profitability allows for reinvestment in R&D and shareholder rewards, creating a positive feedback loop [10] Group 4: Shareholder Returns - Over the past decade, Zoetis has increased its dividend by 22% annually while reducing its total shares outstanding by 1% annually since 2014 [11][12] - The recent 36% drop in share price enhances the value of stock buybacks, allowing management to repurchase shares at a discount [12] Group 5: Valuation - Currently, Zoetis trades at a price-to-earnings ratio (P/E) of 29 and a dividend yield of 1.2%, both at historically attractive levels [13][14] - This combination of discounted price, steady growth, and rising profitability presents a once-in-a-decade investment opportunity [14]