QS Research · Michael Burry's Scion Capital analyst template · 2006
Zoetis Inc. (ZTS)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -24% · upside +30%
The market is pricing Zoetis as if the U.S. companion animal decline and generic competition are permanent: at $79.40 the stock is 12.9x TTM P/E, 11.2x TTM EV/EBITDA and a 6.9% FCF yield on TTM FCF of $2.23B. At today's 11.2x on TTM EBITDA of $3.54B the base case is roughly $79/share (0% vs $79.40), while the section 13 9.0x and 14.0x cases give $59.90 (-24.5%) and $103.47 (+30.3%). Q3 2026 beat and FY2026 adjusted EPS guidance was raised, but revenue is still guided down 2% to 1% organically and buybacks exceed FCF, so the re-rating case is not proven. I would watch, not buy, until the base case clears +30% or U.S. companion animal stabilizes.
Key numbers
- Share price: $79.40
- Market cap: $32.26B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $9.49B
- EV / EBITDA (TTM): 11.2x
- P/E (TTM): 12.9x
- Price / book: 9.77x
The 15 boxes
- ✓ 1. Long-form business notes
Zoetis sells animal health medicines, vaccines, diagnostics and related products and services across companion animals and livestock, organized into U.S. and International segments; FY2025 revenue was $9.47B, with U.S. $5,097M (54%), International $4,254M (45%), companion animal about 70% and livestock about 29%. Product concentration is meaningful: Simparica/Simparica Trio about 16% and Apoquel/Apoquel Chewable about 12% of FY2025 revenue, with the top ten product lines about 57%. The six-year XBRL shows revenue rising from $6.67B in FY2020 to $9.47B in FY2025 and buybacks rising from $250M to $3.23B. The latest 10-K also records the October 2024 medicated feed additive divestiture and 2025 Veterinary Pathology Group acquisition, while the oldest excerpt (FY2020) is mainly risk-factor text and gives 2020 non-U.S.-dollar revenue at about 42%.
- ✓ 2. Competitive advantage
Zoetis has a durable but not unassailable competitive advantage: it is the largest animal-health company by revenue, with vet-controlled distribution, brand loyalty after exclusivity, a large patent and trademark portfolio, 21 company-operated manufacturing sites plus over 90 CMOs, and $698 million of FY2025 R&D. FY2020-FY2025 XBRL shows revenue rising from $6.67B to $9.47B, pre-tax income from $2.00B to $3.36B, net income from $1.64B to $2.67B and operating cash flow from $2.13B to $2.90B. The moat is product- and patent-specific: Draxxin U.S. sales fell 66% since 2021 generic entry, and Cerenia and Excede generics are already marketed in some major markets.
- ✓ 3. 10-Q takeaways
Q3 2026 revenue was $2,391M, down 1% reported and 2% operational; GAAP net income fell 18% to $591M while adjusted net income fell 5% to $720M and adjusted diluted EPS rose 3% to $1.75. Nine-month revenue was flat at $7,121M, and FY2026 guidance was narrowed for revenue but raised for adjusted net income and adjusted EPS. The 10-Q cites no material risk-factor changes from the 2025 10-K.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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