NEW YORK (TheStreet) -- Shares of Zoetis (ZTS) were gaining 1.2% to $56.05 after-hours on Thursday following a report that drug manufacturer Valeant Pharmaceuticals (VRX) is potentially interested in acquiring the animal health company.
Valeant recently made a preliminary approach to acquire Zoetis, according to the Wall Street Journal. It's not clear how Zoetis reacted to Valeant's approach, of if the company is open to selling itself.
Zoetis executives recently said the company is interested in buying assets in order to expand, but analysts view the company as a potential takeover target, according to the Journal.
Zoetis stock closed up 11.4% at an all-time high of $55.38 Thursday as news of Valeant's approach broke minutes before the market closed.
Zoetis produces medicine and vaccinations for pets and livestock and was spun off of drug manufacturer Pfizer (PFE) in 2013.
TheStreet Ratings team rates ZOETIS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ZOETIS INC (ZTS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ZTS's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 0.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ZOETIS INC has improved earnings per share by 6.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ZOETIS INC increased its bottom line by earning $1.16 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.16).
- Net operating cash flow has significantly increased by 360.86% to $60.00 million when compared to the same quarter last year. In addition, ZOETIS INC has also vastly surpassed the industry average cash flow growth rate of -24.06%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 53.54% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The gross profit margin for ZOETIS INC is rather high; currently it is at 68.08%. Regardless of ZTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ZTS's net profit margin of 14.87% is significantly lower than the industry average.
- You can view the full analysis from the report here: ZTS Ratings Report