Better Buy for 2022: Zoetis vs. Zomedica

The animal health market is gradually gaining traction across the globe.  That’s due to increased government focus on averting animal disease outbreaks benefits the animal health sector and because of rapid technological advancements and increasing research and development activities in the veterinary pharmaceutical industry. According to a Transparency Market Research report, the global animal healthcare market is expected to reach $63.2% billion by 2028. Therefore, both Zoetis Inc. (ZTS) and Zomedica Corp. (ZOM) should benefit.

ZTS discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products internationally. It commercializes products primarily across species, including livestock and companion animals. On the other hand, ZOM is a veterinary health company that focuses on clinical veterinarians' unmet needs by developing products for companion animals. The company engages in the development and commercialization of TRUFORMA.

ZTS has gained 26% in the past year, while ZOM has lost a whopping 87% during the same period.  But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On January 13, 2022, ZTS announced that the U.S. Food and Drug Administration had approved Solensia to control cats' osteoarthritis pain, helping improve mobility, comfort, and overall well-being. This could lead to increasing demand for its solution in the upcoming months.

On January 27, 2022, ZOM updated its marketing activities during the first quarter of 2022. The sales and marketing management from both Zomedica and PulseVet completed PulseVet sales training for Zomedica's 18-strong field sales organization. Adrian Lock, Vice President, General Manager of ZOM, and CEO of PulseVet, said, "We are excited about the opportunity to build on our momentum by leveraging the fully trained Zomedica field sales force to continue to grow the business."

Recent Financial Results

ZTS’ revenue increased 18% year-over-year to $1.99 billion for the fiscal third quarter ended September 30, 2021. The company’s non-GAAP gross profit grew 13.2% year-over-year to $1.41 billion, while its non-GAAP net income came in at $597 million representing a 13.9% year-over-year increase. Also, its non-GAAP EPS came in at $1.25, up 13.6% year-over-year.

ZOM’s revenues came in at $22,514 for the fiscal third quarter ended September 30, 2021. Its cash and cash equivalents came in at $271.40 million compared to $52 in the year-ago period. However, its net loss increased 26% year-over-year to $6.30 million. Also, the company’s loss per share came in flat at $0.01 year-over-year.

Past and Expected Financial Performance

ZTS’ total assets grew at a CAGR of 9.4% over the past three years. Analysts expect R’s revenue to increase 8.7% in fiscal 2022.

On the other hand, ZOM’s total assets grew at a CAGR of 304.6% over the past three years. The company’s revenue is expected to increase 243.3% in fiscal 2022.

Profitability

ZTS’ trailing-12-month revenue of $7.62 billion is significantly higher than ZOM’s $52.33 thousand. ZTS is also more profitable with a gross profit margin of 70.01% compared to ZOM’s negative returns.

Furthermore, ZTS’ ROE, ROA, and ROTC are 47.76%, 12.50%, and 14.94% compared to ZOM’s negative values.

Valuation

In terms of trailing-12-month P/S, ZOM is currently trading at 4,786.89x, significantly higher than ZTS’ 11.74x. Moreover, ZOM’s trailing-12-month EV/S ratio of 459.28x is higher than ZTS’ 12.90x.

So, ZTS is relatively affordable here.

POWR Ratings

ZTS has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. On the other hand, ZOM has an overall rating of F, which translates to a Strong Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

ZTS has a grade of A for Quality. This is justified given ZTS' 70.01% trailing-12-month gross profit margin, which is 25.2% higher than the industry average of 55.92%. On the other hand, ZOM has a Quality grade of F, in sync with its negative trailing-12-month gross profit margin, compared to the industry average of 55.92%.

Of the 201 stocks in the Medical - Pharmaceuticals industry, ZTS is ranked #9. In comparison, ZOM is ranked #199.

Beyond what I’ve stated above, we have also rated the stocks for Growth, Momentum, Value, Stability, and Sentiment. Click here to view all the ZTS ratings. Also, get all the ZOM ratings here.

The Winner

The animal healthcare industry is expected to grow with the increasing healthcare needs of pets and livestock. While both ZTS and ZOM are expected to gain, it is better to bet on ZTS now because of its robust financials, lower valuation, and higher profitability.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Medical - Pharmaceuticals industry here.

ZTS shares were unchanged in after-hours trading Wednesday. Year-to-date, ZTS has declined -16.97%, versus a -3.67% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

More...