Zoetis (ZTS) is back in focus after launching Portela for cats and Lenivia for dogs in Canada and the EU, extending its osteoarthritis pain portfolio with long acting monoclonal antibody therapies.

Despite the new Portela and Lenivia launches, Zoetis shares have been under pressure, with the 90 day share price return down 36.19% and the 1 year total shareholder return down 50.27%, pointing to fading momentum as investors reassess growth prospects and risk.

If this kind of volatility has you looking around the animal health and broader healthcare space, it could be worth checking a curated list of 39 healthcare AI stocks as another way to research potential opportunities.

Zoetis has been rolling out new monoclonal antibody therapies at the same time the stock has dropped sharply, raising a simple question for investors as they move into the valuation work that follows: is pricing now reflecting the business or sentiment swings?

Most Popular Narrative: 19.7% Undervalued

Zoetis last closed at $74.57, while the most followed narrative, using a fair value of $92.92, frames the recent share price slide as a valuation reset rather than a change in the core business.

The main reason for the recent collapse in the share price was because they reported that the US Companion Animal segment saw a 11% YoY decline in segment revenues. As that’s where they’re supposed to be focusing on most, given the higher margins and higher defensibility/moat of profits of the Pet segment, it’s no surprise that it resulted in a 30% drop in the share price after Q1 earnings.

If you want to understand why this narrative still sees value in Zoetis after a sharp pullback, focus on the mix of steady earnings growth, premium margins and a profit outlook that assumes neither a boom nor a collapse. The gap between the current share price and the narrative fair value rests on those moving parts.

Result: Fair Value of $92.92 (UNDERVALUED)

However, Zoetis still faces risks, including pressure from generics and further weakness in US Companion Animal revenues. Either of these could challenge this undervalued narrative.

Next Steps

With sentiment on Zoetis clearly mixed, and with both risks and potential rewards in play, it makes sense to move fast and test the numbers against your own expectations by reviewing the 5 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.