Zoetis: A Solid Long-Term Buy After Harsh Drawdown

Friso Alenus 1.37K Followers Follow Summary Zoetis is navigating the worst drawdown in its stock history, driven by weakening U.S. vet clinic traffic and heightened competition across key companion animal franchises. Despite aggressive competitor promotions, Zoetis protects industry-leading profitability (35%–37% EBIT margins) using targeted gross-to-net rebates rather than base list-price cuts. Trading at a historic low 12x P/E and a 7%+ FCF yield, Zoetis offers a strong margin of safety compared to its Base Case DCF fair value of $100.06. A near 3% dividend yield alongside $1.3 billion in remaining share buyback capacity provides strong downside protection while short-term operational headwinds play out. somethingway/E+ via Getty Images Zoetis Inc. ( ZTS ) now trades 70% off its all-time peak, reflecting heavy market panic following guidance revisions, softer U.S. veterinary clinic traffic, and rising promotional intensity from new entrants in key dermatology and parasiticide franchises. This article was written by Friso Alenus 1.37K Followers Follow Friso Alenus is a financial analyst at a private equity and venture capital firm. He has been actively involved in the stock market since 2020, sharpening his analytical skills and investment decision-making. He also has a CFA Level I certificate. As a contributor to Seeking Alpha, Friso shares insights from his own investment portfolio and details his approach to evaluating stocks. With a focus on value investing and a keen eye for risk-reward balance, his analyses offer valuable perspectives for both experienced investors and newcomers. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in ZTS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I am not a financial advisor. Investing is your own responsibility. I am not accountable for any of your losses. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.