Zomedica Corp. (ZOM) and Zoetis Inc. (ZTS) are two popular veterinary healthcare companies engaged in the development, manufacture, and commercialization of animal health medicines in the United States and internationally. ZOM’s lead drug product candidate ZM-007 is used for the treatment of acute diarrhea in small dog breeds and puppies. ZTS offers vaccines to prevent respiratory, gastrointestinal and reproductive tract diseases.
With people spending far more time at home, coping with stress and isolation amid the pandemic, there has been a significant increase in pet ownership. This has driven a surge in demand for pet care services, diagnostics and medicine. Since pet owners are now paying more attention to their companions’ health and wellness, and spending more on medical care amid the uncertainties surrounding the pandemic, the demand for veterinary services is expected to grow even more in the coming months. This bodes well for ZOM and ZTS.
While ZOM lost 34.9% over the last month, ZTS surged 8.7%. However, in terms of their past year’s performance, ZOM’s 570.7% makes it a clear winner given ZTS’ 33.2% returns. But, which of these stocks is a better pick now? Let’s find out.
Latest Movements
On April 15, ZOM announced plans to build its direct sales organization while phasing out its distributor-based sales model as its TRUFORMA platform’s market presence grows. The expansion would give the company a stronger foundation on which to build its platform’s marketing and sales.
Last month, ZOM recorded its first veterinarian sale of TRUFORMA. The unique diagnostic tool should help ZOM drive significant shareholder value.
In February, ZTS received marketing authorization from the European Commission for Solensia—for treating osteoarthritis in cats. This success should allow the company to explore new therapeutic areas and meaningful innovations in feline medicines.
Recent Financial Results
Since ZOM is in its development stage, the company did not record any revenues in 2020. During the year ended December 31, 2020, ZOM reported a net loss of $16.9 million, compared to a loss of approximately $19.8 million for the year ended December 31, 2019. Its research and development expenses declined 22% year-over-year to $8 million. Also, ZOM’s loss per share came in at $0.05 for this period.
In the fourth quarter, ended December 31, 2020, ZTS’ total revenues increased 8% year-over-year to $1.8 billion. The company’s gross profit rose 5.4% from its year-ago value to $1.21 billion. ZTS reported $359 million in net income and EPS of $0.75 during this period.
Past and Expected Financial Performance
ZOM’s total assets have increased at a 133.2% CAGR over the past three years. In comparison, ZTS’ total assets grew at a 16.6% annualized rate over this period.
The Street expects ZOM’s revenue to rise 243.3% next year. Consensus EPS estimates indicate a 100% increase in the current quarter and 80% in 2021. In comparison, analysts expect ZTS’ revenue to increase 7.1% in 2022. Also, the company’s EPS is estimated to increase 8.4% in the current quarter and 12.2% next year.
Profitability
ZTS’ ROE and ROA of 50.5% and 11.4%, respectively, compare favorably with ZOM’s negative returns. Moreover, ZTS’ $2.13 billion in cash from operations compares favorably with ZOM’s negative $16.24 million.
POWR Ratings
ZTS has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. However, ZOM has an overall D rating, which translates to Sell. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Both ZOM and ZTS have a Momentum Grade of C due to their mixed price performance.
ZTS has a B grade for Sentiment, which is consistent with analysts’ expectations that its revenue and EPS will increase. In contrast, ZOM has a Sentiment Grade of D.
Also, ZTS has a B Stability Grade, reflecting that the stock is less volatile compared to its peers. In comparison, , ZOM has a D grade for Stability.
Of the 235 stocks in the F-rated Medical – Pharmaceuticals industry, ZTS is ranked #9 while ZOM is ranked #215.
Beyond what we’ve highlighted, our POWR Ratings system has also rated both ZTS and ZOM for Quality, Growth, and Value. Get all ZTS ratings here. Also, click here to see the additional POWR Ratings for ZOM.
The Winner
Both ZOM and ZTS can be considered good long-term investments given their innovative point-of-care diagnostics products for dogs and cats. However, ZOM is still in its development stage and, hence, has not yet begun generating revenues. So, we believe ZTS is a better buy, given the acceleration of its diagnostics portfolio penetration and its significant operational growth.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Medical – Pharmaceuticals industry.
ZTS shares were trading at $173.00 per share on Thursday morning, up $1.28 (+0.75%). Year-to-date, ZTS has gained 4.85%, versus a 12.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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