Zoetis (NYSE:ZTS) and McKesson (NYSE:MCK) are both large-cap medical companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, risk, profitability, dividends and earnings.
Dividends
Zoetis pays an annual dividend of $1.00 per share and has a dividend yield of 0.6%. McKesson pays an annual dividend of $1.68 per share and has a dividend yield of 0.9%. Zoetis pays out 27.5% of its earnings in the form of a dividend. McKesson pays out 11.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Zoetis has raised its dividend for 1 consecutive years and McKesson has raised its dividend for 4 consecutive years. McKesson is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Institutional & Insider Ownership
92.5% of Zoetis shares are owned by institutional investors. Comparatively, 85.6% of McKesson shares are owned by institutional investors. 0.2% of Zoetis shares are owned by insiders. Comparatively, 0.3% of McKesson shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Analyst Recommendations
This is a summary of recent ratings and recommmendations for Zoetis and McKesson, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Zoetis | 0 | 6 | 9 | 0 | 2.60 |
McKesson | 0 | 2 | 10 | 1 | 2.92 |
Zoetis currently has a consensus target price of $170.0833, suggesting a potential upside of 4.50%. McKesson has a consensus target price of $196.00, suggesting a potential upside of 2.18%. Given Zoetis' higher possible upside, analysts plainly believe Zoetis is more favorable than McKesson.
Profitability
This table compares Zoetis and McKesson's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
---|
Zoetis | 25.50% | 63.89% | 14.99% |
McKesson | 0.95% | 45.52% | 4.42% |
Earnings and Valuation
This table compares Zoetis and McKesson's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Zoetis | $6.26 billion | 12.33 | $1.50 billion | $3.64 | 44.63 |
McKesson | $231.05 billion | 0.13 | $900 million | $14.95 | 12.81 |
Zoetis has higher earnings, but lower revenue than McKesson. McKesson is trading at a lower price-to-earnings ratio than Zoetis, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Zoetis has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500. Comparatively, McKesson has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500.
Summary
McKesson beats Zoetis on 10 of the 18 factors compared between the two stocks.