Stock Analysis on Net

Zoetis Inc. (NYSE:ZTS)

This company has been moved to the archive! The financial data has not been updated since May 5, 2022.

Dividend Discount Model (DDM)

Microsoft Excel

Intrinsic Stock Value (Valuation Summary)

Zoetis Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 10.55%
0 DPS01 1.00
1 DPS1 1.44 = 1.00 × (1 + 43.54%) 1.30
2 DPS2 1.94 = 1.44 × (1 + 35.13%) 1.59
3 DPS3 2.46 = 1.94 × (1 + 26.72%) 1.82
4 DPS4 2.91 = 2.46 × (1 + 18.31%) 1.95
5 DPS5 3.20 = 2.91 × (1 + 9.91%) 1.94
5 Terminal value (TV5) 548.02 = 3.20 × (1 + 9.91%) ÷ (10.55%9.91%) 331.94
Intrinsic value of Zoetis Inc. common stock (per share) $340.53
Current share price $171.45

Based on: 10-K (reporting date: 2021-12-31).

1 DPS0 = Sum of the last year dividends per share of Zoetis Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.42%
Expected rate of return on market portfolio2 E(RM) 13.60%
Systematic risk of Zoetis Inc. common stock βZTS 0.67
 
Required rate of return on Zoetis Inc. common stock3 rZTS 10.55%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rZTS = RF + βZTS [E(RM) – RF]
= 4.42% + 0.67 [13.60%4.42%]
= 10.55%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Zoetis Inc., PRAT model

Microsoft Excel
Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Dividends declared 509 404 330 261 216
Net income attributable to Zoetis Inc. 2,037 1,638 1,500 1,428 864
Revenue 7,776 6,675 6,260 5,825 5,307
Total assets 13,900 13,609 11,545 10,777 8,586
Total Zoetis Inc. equity 4,543 3,769 2,708 2,185 1,770
Financial Ratios
Retention rate1 0.75 0.75 0.78 0.82 0.75
Profit margin2 26.20% 24.54% 23.96% 24.52% 16.28%
Asset turnover3 0.56 0.49 0.54 0.54 0.62
Financial leverage4 3.06 3.61 4.26 4.93 4.85
Averages
Retention rate 0.77
Profit margin 24.80%
Asset turnover 0.55
Financial leverage 4.14
 
Dividend growth rate (g)5 43.54%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Retention rate = (Net income attributable to Zoetis Inc. – Dividends declared) ÷ Net income attributable to Zoetis Inc.
= (2,037509) ÷ 2,037
= 0.75

2 Profit margin = 100 × Net income attributable to Zoetis Inc. ÷ Revenue
= 100 × 2,037 ÷ 7,776
= 26.20%

3 Asset turnover = Revenue ÷ Total assets
= 7,776 ÷ 13,900
= 0.56

4 Financial leverage = Total assets ÷ Total Zoetis Inc. equity
= 13,900 ÷ 4,543
= 3.06

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.77 × 24.80% × 0.55 × 4.14
= 43.54%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($171.45 × 10.55%$1.00) ÷ ($171.45 + $1.00)
= 9.91%

where:
P0 = current price of share of Zoetis Inc. common stock
D0 = the last year dividends per share of Zoetis Inc. common stock
r = required rate of return on Zoetis Inc. common stock


Dividend growth rate (g) forecast

Zoetis Inc., H-model

Microsoft Excel
Year Value gt
1 g1 43.54%
2 g2 35.13%
3 g3 26.72%
4 g4 18.31%
5 and thereafter g5 9.91%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 43.54% + (9.91%43.54%) × (2 – 1) ÷ (5 – 1)
= 35.13%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 43.54% + (9.91%43.54%) × (3 – 1) ÷ (5 – 1)
= 26.72%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 43.54% + (9.91%43.54%) × (4 – 1) ÷ (5 – 1)
= 18.31%