Last update on 2024-06-06

Zoetis (ZTS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Zoetis (ZTS) scored 8/9 on the Piotroski F-Score in 2023, reflecting strong financial health backed by profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 8

We're running Zoetis (ZTS) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a financial scoring system that evaluates a company’s financial strength on a scale from 0 to 9 based on nine distinct criteria. The criteria cover aspects of profitability, liquidity, and operational efficiency. In analyzing Zoetis (ZTS), the company scored an impressive 8 out of 9, suggesting strong financial health.

Insights for Value Investors Seeking Stable Income

Given Zoetis' high score of 8 on the Piotroski F-Score, the company demonstrates solid profitability, good liquidity, and efficient operations. This performance indicates that Zoetis is a robust contender for investment and is worth considering for inclusion in an investment portfolio.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Zoetis (ZTS)

Company has a positive net income?

Net income examines if the company is making a profit. A positive net income is a fundamental indicator of profitability and financial health of a company.

Zoetis (ZTS) reported a net income of $2.344 billion in 2023, which is definitively positive. Over the past 15 years, Net Income for Zoetis has shown a particularly strong upward trend. Starting from a loss of $100 million in 2009, the company turned profitable in 2010 with $110 million and has seen consistent growth, peaking at the current $2.344 billion in 2023. This sustained profitability trend underscores the company's robust financial health and solidifies investors’ confidence. Hence, for this criterion, Zoetis earns 1 point.

Company has a positive cash flow?

Cash Flow from Operations (CFO) determines the liquidity generated by a company's regular business activities. It's vital as it shows how well a company can generate cash to sustain and grow its operations.

By analyzing Zoetis' 2023 CFO of $2.353 billion, we observe a positive trend in their ability to generate cash through core operations. Historically, the CFO figures reveal consistent growth, with notable increments over the last 15 years. From a mere $98 million in 2009, it has surged to $2.353 billion in 2023. Such growth highlights robust operational efficiency and increasing liquidity. Therefore, Zoetis earns one point for this criterion, reinforcing its financial health and operational prowess. This consistent upward trend bodes well for future operational stability and shareholder value.

Return on Assets (ROA) are growing?

Examining the change in Return on Assets (ROA) helps assess a company's efficiency in using assets to generate earnings, which is critical for investors.

Zoetis (ZTS) demonstrated an increase in ROA from 0.1467 in 2022 to 0.1605 in 2023, a rise of approximately 0.0138. This upward trend symbolizes improved operational efficiency, as the company is generating more profit per dollar of assets compared to the previous year. Enhancing ROA is a positive indicator in the Piotroski Analysis, thus scoring 1 point. When compared to the industry median ROA, which saw a decrease over the years from 0.4987 in 2022 to 0.5013 in 2023, Zoetis is clearly outperforming its peers, as demonstrated by its resilient ascend. The company's increasing operating cash flow, which has climbed steadily from $98 million in 2009 to $2.35 billion in 2023, underpins this strong performance. The juxtaposition of a gradually ascending ROA with robust cash flows and favorable industry comparison further solidifies Zoetis' financial standing.

Operating Cashflow are higher than Netincome?

One of the Piotroski criteria assesses whether a company's operating cash flow exceeds its net income. This indicates strong cash generation capability.

For Zoetis (ZTS) in 2023, the operating cash flow stands at $2,353 million, surpassing the net income of $2,344 million. This earns a score of 1 on the Piotroski scale. A higher operating cash flow compared to net income is a positive sign, suggesting efficient cash management and potential for sustainable operations. Historically, over the last 15 years, the company's operational cash flow has demonstrated consistent growth, reinforcing its robustness in converting sales into actual cash.

Liquidity of Zoetis (ZTS)

Leverage is declining?

Analyze the change in leverage from 2022 to 2023 for Zoetis (ZTS) and why it matters in understanding financial health.

The leverage of Zoetis has increased from 0.4515 in 2022 to 0.4726 in 2023, indicating an increase in the company's debt levels relative to its equity. This transition is not favorable as higher leverage often implies increased financial risk, particularly the risk related to potentially higher interest expenses and the company's ability to service its debt. Reviewing the last 15 years of leverage data, it is evident that Zoetis saw significant leverage fluctuations, peaking notably in 2013. The gradual reduction in leverage from 0.5978 in 2018 to 0.4515 in 2022 was a positive trend, which has now temporarily reversed in 2023. This can signal caution for investors concerned with the company's increasing reliance on debt financing and its potential impact on financial stability.

Current Ratio is growing?

Change in Current Ratio compares a company's ability to pay short-term obligations. Ideally, it's above 1.

For Zoetis (ZTS), the Current Ratio improved from 2.3701 in 2022 to 3.3579 in 2023, signifying a healthier liquidity position, supporting operational stability. Since it increased, they receive 1 point. Historically, Zoetis' ratios contrast with industry medians, e.g., 2015's 2.1505 vs 2.6239 (median).

Number of shares not diluted?

The change in shares outstanding measures whether a company is issuing new shares or buying back shares.

From the provided data, we observe that Zoetis had 468,891,000 shares outstanding in 2022. By 2023, this number decreased to 461,172,000 shares. This reduction in the number of shares outstanding suggests that Zoetis has bought back shares, which is generally viewed positively by the market as it often signals management's confidence in the company's future prospects and helps increase the earnings per share (EPS) figures. Comparing the historical data, Zoetis has consistently decreased its shares outstanding, evidenced by the steady decline from 500,000,000 in 2009 to 461,172,000 in 2023, with only a few minor increases. This consistent strategy to reduce the shares outstanding is positive and hence scores 1 point on the Piotroski scale for Zoetis.

Operating of Zoetis (ZTS)

Cross Margin is growing?

The change in gross margin over time helps evaluate if Zoetis (ZTS) is efficiently managing its production costs relative to its sales. An increase is positive.

In 2023, Zoetis (ZTS) reported a gross margin of 0.7003, compared to 0.6963 in 2022, indicating a slight increase. Over the last 20 years, Zoetis has generally improved its margins, with a notable rise from around 0.6094 in 2009 to 0.7003 in 2023. This is significantly above the industry median, which was 0.5013 in 2023. This positive trend implies better cost management and operational efficiency, earning Zoetis a point in this criterion.

Asset Turnover Ratio is growing?

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue. Improving turnover indicates better performance.

In 2023, Zoetis (ZTS) reported an asset turnover ratio of 0.585, compared to 0.5606 in 2022. This represents an increase, thus adding 1 point. Historically, this showcases an upward trend from 2022 to 2023, suggesting improved asset utilization since last year. Over the past 15 years, a fluctuation is seen although the current increase is a positive indicator.