Tier List: Animal Health
Comparing stocks in a given industry
The animal health industry is projected to reach $112 billion by 2030, growing at a robust CAGR of 9%. This growth is particularly compelling given that the sector is considered defensive, offering stability even during economic downturns.
In this article, we will examine 10 key players in the animal health space, with a focus on companies that are heavily involved in this sector:
Zoetis
Idexx Laboratories
Freshpet
Virbac
Pets At Home
Vetoquinol
Chewy
The JM Smucker Company
Elanco
PetMed Express
Petco Health & Wellness
These companies represent a mix of established industry leaders and innovative newcomers, providing a comprehensive overview of the animal health market.
S-Tier
1. Zoetis
As the industry leader, this company boasts a strong net profit margin, effective management, and a strategic approach to utilizing excess cash for acquisitions, share buybacks, and dividends. However, the primary drawback is that the stock is relatively expensive.
2024 growth: 7.5%
Net profit margin: 26.9%
ROE: 50.2%
Debt leverage: 1.1x EBITDA
PE: 35.7x
Dividend yield: 0.9%
2. Idexx
Zoetis' main competitor offers a stronger growth profile and maintains an excellent balance sheet. However, this comes at a premium, as the stock is even more expensive than Zoetis, potentially deterring cost-conscious investors.
2024 growth: 7.0%
Net profit margin: 22.3%
ROE: 51.3%
Debt leverage: 0.3x EBITDA
PE: 48.5x
Dividend yield: -%
A-Tier
3. Freshpet
Freshpet is the high-growth standout in the industry, with 2024 projected to be its first profitable year in over a decade. While stock-based compensation is somewhat elevated, this is unlikely to pose a significant issue as the company continues to expand. As growth accelerates, it is expected to curb further dilution and strengthen shareholder value.
2024 growth: 26.3%
Net profit margin: 3.9%
ROE: 3.6%
Debt leverage: 1.1x EBITDA
PE: 204x (77x in 2026)
Dividend yield: -%
B-Tier
4. Virbac
The largest French animal health laboratory delivers decent growth, though it lacks the profitability of the industry's top players. However, its financial metrics have shown consistent improvement, signaling a positive trend that could lead to enhanced profitability over time.
2024 growth: 13.0% (2.5% in 2023 and 5.9% in 2025)
Net profit margin: 10.8%
ROE: 15.5%
Debt leverage: 0.3x EBITDA
PE: 21.9x
Dividend yield: 0.39%
5. Pets At Home
While this UK retail chain currently struggles with profitability and capital efficiency, it is well-positioned for improvement and has a low PE presenting a reasonable risk/reward opportunity.
2024 growth: 4.3%
Net profit margin: 6.8%
ROE: 10.2%
Debt leverage: 1.4x EBITDA
PE: 13.5x
Dividend yield: 4.53%
C-Tier
6. Vetoquinol
While Vetoquinol's growth may be slower compared to peers, it offers a reasonable valuation within the sector. The company's strong cash position provides an opportunity to boost EPS forecasts through strategic acquisitions or well-timed investments. Profitability must be increase to improve the rating of the company.
2024 growth: 3.4%
Net profit margin: 5.2%
ROE: 9.4%
Net cash position: 1.7x EBITDA
PE: 18.9x
Dividend yield: 1.05%
7. Chewy
Chewy's growth has slowed, and its profitability remains modest. Despite these challenges, the company commands a high valuation relative to its current growth profile. However, a key strength is its debt-free balance sheet, which provides financial flexibility and reduces risk.
2024 growth: 5.4%
Net profit margin: 3.2%
ROE: 85%
Net cash position: 1.7x EBITDA
PE: 33.7x
Dividend yield: -%
D-Tier
8. The JM Smucker Company
Erratic revenue, inconsistent profitability, and a weak growth outlook present significant challenges for the company. Additionally, its high debt levels further complicate its path to improvement. Overcoming these obstacles will require navigating numerous hurdles to stabilize performance and enhance financial health.
2024 growth: 8.8% (2.2% in 2025 and 1.9% in 2026)
Net profit margin: 9.9%
ROE: 13.0%
Debt leverage: 3.9x EBITDA
PE: 14.5x
Dividend yield: 3.6%
E-Tier
9. Elanco
Despite generating over $4 billion in revenue, the company continues to struggle with profitability, remaining unprofitable for the past four years. Projected revenues for 2026 are expected to be flat compared to 2021, indicating no growth. Significant dilution has further eroded shareholder value, and the company carries a substantial debt load, nearly five times its EBITDA.
2024 growth: 0.2%
Net profit margin: 7.6% (1.9% in 2025 and 3.5% in 2026)
ROE: 7.2%
Debt leverage: 4.9x EBITDA
PE: 20.9x
Dividend yield: -%
10. Petmed Express
Since 2019, the company has experienced a negative trend, with both declining revenue and almost no profitability. On a positive note, the company remains debt-free.
2024 growth: -5.3%
Net profit margin: 0.7%
ROE: 1.8%
Net cash position: 7.0x EBITDA
PE: 41.2x
Dividend yield: -%
11. Petco Health & Wellness
Unprofitable and without growth, the company dilutes its shareholders and has debt.
2024 growth: -1.8%
Net profit margin: -1.5%
ROE: -2.1%
Debt: 4.0x EBITDA
PE: -14.8x
Dividend yield: -%
Conclusion
Animal health sector is looking attractive for long-term investors, especially given its defensive nature. Key players like Zoetis and Idexx dominate the market, with strong profitability and solid financial health, though their high valuations may be a deterrent for some. Mid-tier companies such as Freshpet and Virbac show potential.
However, not all players are on solid ground. Companies like PetMed Express, Elanco, and Petco face significant challenges, including profitability issues, slow or negative growth, and high levels of debt, making them riskier investments. A strong recovery is always possible, but without clear indicators, this leans more toward speculation than a sound investment.