Hi Bob thanks for the great write up! I saw you mentioned 'Over the past decade, Zoetis converted only 76% of its non-GAAP net profit to free cash flow, indicating low earnings quality due to high capital spending and increasing inventory days' and a was wondering if you believe management's aggressive capital spending and rising inventory days mean they are suboptimally allocating capital, and whether an activist could build a compelling case to unlock that trapped value by demanding tighter working capital discipline.
Thanks for the analysis. I am wondering why analysts have recently downgraded ZTS and upgraded ELAN. I have seen that ELAN is gaining market share, but the balance sheet is still concerning to me. Thus, I would prefer ZTS
Elanco has struggled to match Zoetis’ innovation historically but the company has recently come out with two important products to compete with Zoetis in dermatology and triple combination parasiticides. So Elanco’s growth is accelerating while Zoetis’ growth moderates. I still believe the market supports healthy growth for both companies. And I think Zoetis will continue to create and lead new animal health categories going forward. Like oncology and chronic kidney disease, which Zoetis expects approvals for in next 1-3 years.
Very nice, thanks for sharing this analysis. Very clean as well. Zoetis is in my watch list in balance for a potential entry - in competion with TMO/GMAB. I already have MRK and will as the cycle pharma cycle begins.
Glad you enjoyed it. Both ZTS and TMO are names I like and have been buying recently for my portfolio. Sector is out of favor but I think it creates an opportunity for long-term investors.
Hi Bob thanks for the great write up! I saw you mentioned 'Over the past decade, Zoetis converted only 76% of its non-GAAP net profit to free cash flow, indicating low earnings quality due to high capital spending and increasing inventory days' and a was wondering if you believe management's aggressive capital spending and rising inventory days mean they are suboptimally allocating capital, and whether an activist could build a compelling case to unlock that trapped value by demanding tighter working capital discipline.
Thanks for the analysis. I am wondering why analysts have recently downgraded ZTS and upgraded ELAN. I have seen that ELAN is gaining market share, but the balance sheet is still concerning to me. Thus, I would prefer ZTS
Elanco has struggled to match Zoetis’ innovation historically but the company has recently come out with two important products to compete with Zoetis in dermatology and triple combination parasiticides. So Elanco’s growth is accelerating while Zoetis’ growth moderates. I still believe the market supports healthy growth for both companies. And I think Zoetis will continue to create and lead new animal health categories going forward. Like oncology and chronic kidney disease, which Zoetis expects approvals for in next 1-3 years.
Appreciate the quick reply. I subscribed to your channel. Looking forward for more content.
Very nice, thanks for sharing this analysis. Very clean as well. Zoetis is in my watch list in balance for a potential entry - in competion with TMO/GMAB. I already have MRK and will as the cycle pharma cycle begins.
Glad you enjoyed it. Both ZTS and TMO are names I like and have been buying recently for my portfolio. Sector is out of favor but I think it creates an opportunity for long-term investors.