In December 2018, Zoetis Inc. (NYSE:ZTS) released its earnings update. Generally, analyst forecasts seem fairly subdued, with earnings expected to grow by 2.2% in the upcoming year against the higher past 5-year average growth rate of 22%. Presently, with latest-twelve-month earnings at US$1.4b, we should see this growing to US$1.5b by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Zoetis in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Zoetis in the longer term?
Over the next three years, it seems the consensus view of the 15 analysts covering ZTS is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ZTS’s earnings growth over these next few years.
From the current net income level of US$1.4b and the final forecast of US$2.0b by 2022, the annual rate of growth for ZTS’s earnings is 11%. EPS reaches $4.22 in the final year of forecast compared to the current $2.96 EPS today. With a current profit margin of 25%, this movement will result in a margin of 28% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Zoetis, I’ve put together three pertinent aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Zoetis worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Zoetis is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Zoetis? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.