Zoetis Inc. (ZTS) Intrinsic Value & DCF Valuation
Drug Manufacturers - General · NYSE
Current Price
$75.75
Intrinsic Value
$91.07
+16.8% margin of safety
What Is Zoetis Inc.'s Intrinsic Value?
As of 2026-07-30, the base-case DCF model estimates the intrinsic value of Zoetis Inc. (ZTS) at $91.07 per share, compared with a market price of $75.75, a margin of safety of +16.8%. The base case assumes 7.3% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $71.47 to $113.72. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is Zoetis Inc. (ZTS) Undervalued?
At $75.75, ZTS trades about 16.8% below the base-case intrinsic value estimate. That is a real discount, but it stays short of the 30% margin of safety required before calling a stock undervalued.
COMPETITIVE MOAT
↑Strong R&D and Product Pipeline
Zoetis invests heavily in research and development, leading to a robust pipeline of innovative animal health products. This continuous innovation creates a competitive edge and drives future growth.
↑Global Market Leadership and Scale
As a leading global animal health company, Zoetis benefits from significant scale in manufacturing, distribution, and market access. This scale provides cost advantages and broad customer reach.
↑Brand Reputation and Veterinarian Trust
Zoetis has cultivated a strong reputation for quality and efficacy among veterinarians and pet owners. This trust translates into customer loyalty and a preference for their products.
INVESTMENT RISKS
↓Patent Expirations and Generic Competition
As patents on key products expire, Zoetis faces increased competition from generic manufacturers. This can lead to price erosion and a decline in market share for its established drugs.
↓Adverse Events and Product Recalls
Any significant adverse events or recalls associated with Zoetis's products could severely damage its reputation and lead to substantial financial losses. This risk is inherent in the pharmaceutical industry.
↓Economic Downturns Affecting Pet/Livestock Spending
Consumer and agricultural spending on animal health can be discretionary. Economic downturns may lead to reduced demand for Zoetis's products as owners cut back on non-essential treatments.
Base case
ZTS base case valuation
Intrinsic Value
$91.07
Margin of safety
+16.8%
Expected annual return
+3.8%
Base case assumptions: 7.3% annual growth, 10.0% discount rate, 15x exit multiple, 5 year projection. Data as of 2026-07-30.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the ZTS valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Zoetis Inc. respond.
Open DCF Calculator for ZTSCompany Overview
Zoetis Inc. stands as a global leader in animal health, focusing on the research, development, manufacturing, and commercialization of veterinary pharmaceuticals, vaccines, and diagnostic tools. Its comprehensive portfolio serves a broad spectrum of species, encompassing both livestock, including cattle, swine, poultry, fish, and sheep, and beloved companion animals such as dogs, cats, and horses. Among its pharmaceutical offerings are various therapeutic agents. This includes vaccines, vital for preventing respiratory, gastrointestinal, and reproductive diseases by stimulating a targeted immune response; anti-infectives that combat or inhibit the proliferation of bacterial, fungal, or protozoal pathogens; and parasiticides aimed at eradicating both internal and external pests such as fleas, ticks, and various worms. Additional pharmaceuticals address areas such as pain management and sedation, anti-emesis, reproductive health, and oncology. The portfolio also features dermatological solutions for allergic skin conditions and atopic dermatitis, alongside medicated feed additives specifically designed for livestock. Beyond therapeutics, Zoetis offers an extensive array of diagnostic solutions. These include portable analysis systems for blood and urine, point-of-care testing devices, specialized instruments and reagents, rapid immunoassay kits, comprehensive reference laboratory services, and blood glucose monitoring equipment. Further extending its reach, the company provides supplementary offerings such as nutritional products, agribusiness support services, biodevices, genetic testing, and innovations in precision animal health. Zoetis distributes its diverse product portfolio to a broad customer base, including veterinary professionals, livestock producers, and retail channels. This distribution occurs directly via its sales representatives and technical specialists, as well as through partnerships with third-party veterinary distributors. Established in 1952, the company maintains its corporate headquarters in Parsippany, New Jersey.
Financial Metrics — ZTS Stock Valuation Data
Revenue/Share (TTM)
$22.53
FCF/Share (TTM)
$5.06
ROIC (TTM)
21.8%
ROE (TTM)
62.4%
P/FCF
14.9x
EV/EBITDA
9.7x
FCF Yield
6.73%
Debt/Equity
2.86x
On a trailing twelve-month basis, ZTS generates free cash flow per share of $5.06 alongside a ROIC of 21.8%, both central inputs for a DCF valuation. Its P/FCF ratio of 14.9x and FCF yield of 6.73% then frame how ZTS is priced against peers on a cash flow basis.
Frequently Asked Questions
What is the intrinsic value of ZTS?
Zoetis Inc. currently generates $5.06 in free cash flow per share. At the current price of $75.75, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is ZTS undervalued?
ZTS trades at a P/FCF ratio of 14.9x with a free cash flow yield of 6.73%. A low P/FCF means investors are paying less per dollar of free cash flow; whether that is cheap depends on the company's growth, cyclicality, and capital intensity. However, whether ZTS is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value ZTS stock using DCF?
To perform a DCF valuation on Zoetis Inc.: (1) Start with the trailing free cash flow per share ($5.06) as the base, (2) project future FCF growth over 5-10 years based on Drug Manufacturers - General industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting ZTS's risk profile — with a debt-to-equity of 2.86x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to ZTS?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Zoetis Inc., this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Drug Manufacturers - General trends, then discounting those amounts to today's dollars. ZTS's ROIC of 21.8% reflects how efficiently the company converts invested capital into profit.
How does WACC affect ZTS stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For ZTS, with a debt-to-equity ratio of 2.86x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 9.7x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See ZTS PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Healthcare valuationsDCF and P/E value ZTS with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-07-30. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.