Vaccines for dogs and cats, antibiotics for cows: the market for veterinary products is growing worldwide. The American company is at the forefront and is also number one for investors. By Stefan Riedel
Zoetis shareholders have a lot of fun with their investment. Over the last two years, the stock price has almost doubled and those who have been there for five years can expect to quadruple. In Germany, it was not a large number of investors: apart from some funds and health experts, the title is known so far only a manageable circle.
Anyone who has not yet seen the US veterinary drug specialists on the radar, said reassure: The stock remains interesting because Zoetis will continue to grow above average. The company, created by the US pharmaceutical giant Pfizer in 2013, is the world's largest veterinary drug developer and has annual sales of $ 5.8 billion. In addition to drugs and vaccines, Zoetis offers food additives, parasitic agents and medicated feeds. There are also laboratory services such as gene analysis and immunodiagnostics.
Zoetis is also the industry leader in terms of profitability. The operating margin has increased from 32 to 35.7% in the last two years. Analysts expect this value to continue to improve to 38.4% by 2020. By comparison: Elanco, the listed subsidiary of Eli Lilly since 2018 , recently reached 16.7%.
One of the reasons for this is the high-margin pet product segment, which increased revenues from $ 1.6 billion to $ 2.6 billion in 2014-2018. For Hendrik Lofruthe, portfolio manager at Apo Asset Management, Zoetis is well ahead of the competition in two other areas: "The company distributes nationally to veterinary clinics and retailers and is able to reduce fixed costs thanks to high production volumes. "
Animals as a driver back
From an investor's point of view, veterinary medicine is so attractive because, unlike human medicine, there is no price discussion. No matter how the economy develops: pet owners will not miss their noses and will pay for them themselves. Starting with tick remedies, fleas and allergies to expensive medical treatments in old age. Masters want their pets treated for hip problems, diabetes or kidney disease.
However, the largest volume in terms of volume remains that of products intended for animals held for food production. 64% of the proceeds go not to dogs or cats, but to poultry, cows, pigs and other farm animals whose meat is found in refrigerators and kettles. The growing consumption of meat in emerging countries, fueled by growing prosperity, has fueled the search for even greater profits. Improved nutritional supplements allow you to gain weight faster until you are slaughtered.
With its products, Zoetis is also positioned in lucrative niches. "In general, trends in the development of veterinary drugs are similar to those seen in human medicine – that is, more focused on diagnosis and prevention," says fund manager Lofruthe. In order to play a leading role here, Zoetis has put two billion dollars on the table for acquisitions such as the Abaxis diagnostic company in the summer of 2018 and has invested in digital applications through the use of the software. acquisition of Smartbow.
The Austrian start-up is a pioneer of smart ear tags with data collection for livestock. Farmers should be able to locate their animals more quickly, recognize early harvest periods and be informed more quickly of changes in rumination behavior. Data can be transferred directly to a PC, smartphone or tablet.
Zoetis is well positioned to continue to outperform the animal health market in the future. Higher margins justify the higher valuation of equities compared to competitors. Due to the small volume of transactions, it is recommended to switch to the New York Stock Exchange. We increase target and stop rates.
Source: gamelover / AdobeStock, BÖRSE ONLINE