Phibro Animal Health Corporation (PAHC) and Zomedica Corporation (ZOM) are two burgeoning players in the animal healthcare industry. PAHC offers antibacterials, anticoccidials, anthelmintics, vaccines, and mineral nutritional products to treat food animals, including poultry, swine, beef and dairy cattle, and aquaculture. In comparison, ZOM is a development stage veterinary diagnostics and pharmaceutical company that discovers, develops, and commercializes drugs, devices, and diagnostics for the health and wellness of companion animals.
Since the pandemic, the rising adoption of pets has increased the demand for quality pet food, viable medications, diagnostic devices, and other pet-friendly products. This has incentivized animal healthcare companies to upgrade their product portfolios and helped gain expanded market reach. The inelastic demand for pet food has increased investor attention in this recession-proof industry. The global animal health market is expected to grow at a 4.8% CAGR to reach $71.04 billion by 2028. So, both PAHC and ZOM should benefit substantially.
PAHC is a winner with 6.3% gains versus ZOM’s negative returns over the past three months. But which of these stocks is a better pick now? Let’s find out.
Recent Financial Results
PAHC’s net sales for its fiscal 2022 second quarter ended December 31, 2021, increased 12.9% year-over-year to $232.70 million. The company’s adjusted gross profit came in at $72.10 million, indicating a 3.3% year-over-year improvement. Its adjusted pre-tax income came in at $20.30 million, up 4.6% from the prior-year period. While its adjusted net income increased 8.6% year-over-year to $15.10 million, its adjusted EPS grew 8.8% to $0.37. As of December 31, 2021, the company had $63.39 million in cash and cash equivalents.
For its fiscal 2021 ended December 31, 2021, ZOM’s net revenue and gross profit came in at $4.13 million and $3.05 million, respectively. The company’s loss from operations came in at $21.37 million, representing a 27.5% year-over-year rise. ZOM’s net loss came in at $18.38 million, up 8.7% from the prior-year period. Its EPS remains unchanged at $0.05. The company had $194.95 million in cash and cash equivalents as of December 31, 2021.
Past and Expected Financial Performance
PAHC’s tangible book value and total assets have increased at CAGRs of 0.3% and 6.8%, respectively, over the past three years.
PAHC’s EPS is expected to grow 7.1% year-over-year in fiscal 2022, ending June 30, 2022. Analysts expect the company’s EPS to grow at a 3.5% rate per annum over the next five years.
In comparison, ZOM’s tangible book value and total assets have increased at CAGRs of 276.2% and 259.5%, respectively, over the past three years.
Analysts expect ZOM’s EPS to remain null in its fiscal year 2022, ending December 31, 2022. The company’s EPS is expected to grow at a 12.8% rate per annum over the next five years.
Valuation
In terms of trailing-12-month Price/Sales, ZOM is currently trading at 67.25x, 7131.2% higher than PAHC’s 0.93x. In terms of trailing-12-month EV/Sales, PAHC’s 1.31x compares with ZOM’s 23.75x.
Profitability
PAHC’s trailing-12-month revenue is almost 212.9 times ZOM’s. PAHC is also more profitable, with a 2.5% levered free cash flow versus ZOM’s negative value.
Furthermore, PAHC’s ROE, ROA, and ROTC of 23.5%, 5.9%, and 7.4% compare with ZOM’s respective negative values.
POWR Ratings
While PAHC has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, ZOM has an overall F grade, equating to Strong Sell. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
PAHC has an A grade for Value, consistent with its lower-than-industry valuation ratios. PAHC’s 0.93x trailing-12-month Price/Sales is 82.2% lower than the 5.22x industry average. However, ZOM’s D grade for Value is in sync with its overvaluations. The company has a 67.25x trailing-12-month Price/Sales, which is 1189.1% higher than the 5.22x industry average.
PAHC has a C grade for Sentiment, consistent with analysts’ slightly lower estimates for the stock. PAHC’s EPS is expected to decline 2.2% year-over-year to $1.33 for fiscal 2023, ending June 30, 2023. ZOM’s D grade for Sentiment is in sync with its negative EPS estimates.
Of the 84 stocks in the Medical - Services industry, PAHC is ranked #10.
ZOM is ranked #199 of 201 stocks in the F-rated Medical - Pharmaceuticals industry.
Beyond what we have stated above, our POWR Ratings system has also rated ZOM and PAHC for Stability, Quality, Momentum, and Growth. Get all ZOM ratings here. Also, click here to see the additional POWR Ratings for PAHC.
The Winner
The growing demand for viable vaccines, drugs, and diagnostic devices for treating animal diseases and rising investor optimism in this recession-proof industry should drive the performance of PAHC and ZOM this year. However, relatively lower valuation and higher profitability make PAHC a better buy here.
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 access the top-rated stocks in the Medical – Services industry, and here for those in the Medical – Pharmaceuticals industry.
PAHC shares were trading at $20.00 per share on Tuesday afternoon, down $0.15 (-0.74%). Year-to-date, PAHC has declined -1.50%, versus a -10.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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