Since being spun out of pharmaceutical giant Pfizer (PFE:NYSE) a decade ago shares in leading animal health company Zoetis (ZTS:NYSE) have gone up more than five-fold.

UK peer Dechra Pharmaceuticals (DPH) has delivered shareholders a similar return over the same period but is leaving the UK stock market after accepting an all cash £4.5 billion takeover from Swedish private equity firm EQT in June 2023.

Shares believes Zoetis is a good fit for investors looking to maintain exposure to the animal health sector which offers attractive long-term growth drivers.

Getting exposure to growth stocks rarely comes cheaply and Zoetis shares trade on an average price to earnings multiple of 30.7 times forward earnings, a similar rating to Dechra.

However, the rating must be compared with expected growth and the US firm is forecast to grow EPS (earnings per share) by 19% in 2023 and a further 12% in 2024 according to LSEG data.

The quality of the business and the growth trajectory suggest an attractive risk to reward. In addition, investors can buy the shares at a 29% discount to December 2021 highs.

Zoetis is the world’s largest animal health company and generated $8 billion (£6.5 billion) of revenue in 2022 which makes it almost 10 times larger than Dechra.

The company has high net profit margins of around 27% and a return on equity over 50% demonstrating higher than average profitability.

The firm provides animal medicines, vaccines, diagnostics, genetic tests, and precision animal health with a market presence in over 100 countries.

Around 65% of revenue is generated from treating companion animals and 35% from animal stock products.

The company has built a diverse, durable, and innovative product portfolio which includes 15 blockbusters (annual revenue greater than $100 million) across 300 product lines.

Zoetis is the market leader in pets, cattle, and fish across the US, Asia and Latin America while holding number two positions in Eastern and Western Europe.

The business operates in growing markets characterised by sustainable drivers including increased humanisation of pets where owners are prioritising health and wellness of their animals.

Since 2017 Zoetis has grown faster than the underlying market delivering 69% revenue growth compared with 34%. Meanwhile net income has grown faster than revenue, almost doubling as operating margins have expanded.

A growing global population means there will be an estimated two billion more mouths to feed by 2050 according to the United Nations. This in turn means more healthy animals are needed to meet increased protein demand.

All in all, Zoetis is a great way to play the long-term growth trend in animal healthcare.

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