ZTS: Buy
Published 17 Sep 2026, 18:49 BST. This is the frozen version, not the current recommendation.
Why this assessment was issued
Stored financial statements changed; the revised figures need checking. Required data is available again; reconsider the suspended assessment. Profitable growth supports the valuation. The price clears the return, cash, borrowing and downside requirements.
Profitable growth supports the valuation. The price clears the return, cash, borrowing and downside requirements.
Supporting evidence
Operating cash covers reported profit
Over the latest four quarters, operating cash was 1.10 times net income. Review receivables, inventory and non-cash charges before judging the gap.
Earnings have outpaced price
Over 1 year (2025-09-12 to 2026-09-11), price changed -50.8% and trailing EPS changed +5.8%. A wider gap changes the earnings multiple; it does not establish fair value.
Opposing evidence
Capital spending changes the cash picture
Operating cash covers 1.10 times profit, but cash after capital spending covers 0.90 times. Cash generation is stronger before the investment bill is paid.
The profit margin narrowed
The latest quarterly operating margin was 38.0%, -2.0 percentage points from a year earlier. Compare the sales and margin contributions below.
The original scenarios
| Scenario | Sales growth | Profit margin | Model value |
|---|---|---|---|
| Weaker | -3.3% | 24.5% | $119.01 |
| Central | 1.7% | 27.2% | $182.83 |
| Stronger | 6.7% | 29.9% | $262.42 |
Method: Earnings and historical valuation. A sufficiently complete, positive earnings record allows the stock's own P/E history to be used. These scenarios are not probability intervals.
Original assumptions and checks
| eps | 6.58 |
|---|---|
| cash | 1476000000.0 |
| debt | 9238000000.0 |
| years | 1.2073921971252566 |
| growth | 1.7071252531995706 |
| margin | 27.48765367237575 |
| profit | 2616000000.0 |
| cash_ok | True |
| debt_ok | True |
| growths | [0.5025125628140614, 3.0211480362537735, 2.91173794358508, -0.24252223120452276] |
| revenue | 9517000000.0 |
| downside | 0 |
| leverage | 1.9385614385614385 |
| multiple | 27.53885135135135 |
| free_cash | 2366000000.0 |
| buy_hurdle | 25.049541295733547 |
| volatility | 40.099082591467095 |
| history_end | 2026-09-11 |
| reward_risk | Not available |
| annual_years | 5 |
| usable_weeks | 157 |
| history_start | 2023-09-15 |
| history_weeks | 157 |
| financial_date | 2026-06-30 |
| interest_cover | 14.794117647058824 |
| operating_cash | 2887000000.0 |
| uncapped_growth | 1.7071252531995706 |
| current_multiple | 11.089665653495441 |
| projected_margin | 27.172953888910435 |
| historical_margin | 26.858254105445116 |
Recent price · Passed. Weekly close dated 2026-09-11.
Suitable business model · Passed. Value operating cash flow or comparable earnings; deduct debt and other ownership claims where appropriate.
Four quarters · Passed. Four quarters ending 2026-06-30.
Current financials · Passed. Statements through 2026-06-30; factor prices dated 2026-09-11.
Annual record · Passed. 5 consecutive annual profit margins, including loss years.
Comparable earnings history · Passed. P/E is usable in 157 of 157 weeks. At least 52 usable weeks and 70% coverage are required; excluding too many loss or missing weeks would bias the target.
Earnings and price dates · Passed. Earnings-release EPS $6.58, for four quarters ending 2026-06-30.
Price risk · Passed. Risk uses the latest 52 weekly price changes.
Comparable sales growth · Passed. Growth uses the median of four quarterly year-on-year comparisons.
Positive statement earnings · Passed. Trailing statement profit is positive.
Earnings reconciliation · Passed. Release EPS is $6.58; statement-derived EPS is $6.33. The difference is within the 5% review threshold; this does not prove there are no unusual items.
Statement totals · Passed. The latest four quarters agree with the trailing snapshot within 5%.
Cash and borrowing · Passed. Cash generation, debt and interest-cover figures are available.
Target publication review · Passed. The model estimate is within SM's automatic publication range of one quarter to four times the current price. This is a review threshold, not evidence that the market price is correct.
Policy sm-review-2-research · Model sm-assessment-14-operating-capital · Data e1f6c56e2ac3.