Phibro Animal Health PAHC currently boasts an attractive valuation, with a forward price-to-earnings (P/E) multiple of 10.41X, well below the five-year industry average of 21.78X and its median of 13.54X.

The company, known for its animal health products, also trades at a more attractive valuation than industry peers IDEXX Laboratories IDXX and Neogen NEOG, which carry higher P/E multiples of 33.93X and 15.80X, respectively. The stock’s appeal is further reinforced by its Value Score of A.

Price-to-Earnings Forward Twelve Months (F12M)

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Over the past year, PAHC shares have surged 64.9%, far outpacing the industry’s 7.8% gain and the S&P 500 composite’s 10.4% rise. The solid uptick reflects the ongoing momentum in the company’s largest segment and expansion into several fast-growing regions. Adding to the rally, Phibro’s fiscal 2025 second-quarter revenues topped the Zacks Consensus Estimate by 3.6%, while earnings soared past the consensus mark by 28.6%. Here’s a look at some drivers behind the performance.

PAHC 1-Year Price Performance

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Legacy MFA Franchise Remains Solid

Phibro’s Medicated Feed Additives (“MFA”) offerings hold the third-largest share in the animal health market.These concentrated medicated products, sold through its MFAs and other segments, are seeing strong uptake in international regions. Additionally, the company offers processing aids used in the ethanol fermentation industry, which also contributes to growth. In the second quarter of fiscal 2025, legacy MFA and other net sales grew 11% year over year, following strong 15% growth in the first quarter.

Phibro’s leading MFA product franchise, Stafac/V-Max/Eskalin, is approved in more than 30 countries for use in poultry, swine, beef and dairy cattle and is regarded as one of the leading MFA products for production animals. Meanwhile, anticoccidials such as nicarbazin and amprolium MFAs are also well-recognized globally. 

Strength in the Vaccine Business

The Vaccine product line is one of Phibro’s highest-growth segments, delivering a 12% year-over-year increase in the second quarter of fiscal 2025. The momentum is backed by the continued growth of poultry products in Latin America along with rising international demand. The company’s IBVAR bronchitis treatment launched a couple of years ago, is a key contributor to this sustained growth. Phibro also markets a solution for a certain strain that currently lacks real competition and has established significant penetration with it, particularly in Brazil.

Innovation also remains a strong focus, leading to the development of new antigens and vaccines, such as the inactivated subunit Infectious Bursal Disease Virus and Egg Drop Syndrome vaccines. On top of that, the company heavily invests in expanding the vaccine manufacturing capacity at several locations, such as in Sligo, Ireland and Guarulhos, Brazil.

PAHC’s Presence in Key High-Growth Markets

Phibro has established a strong foothold in several key high-growth regions where the livestock production growth rate is growing faster than the average growth rate. This includes Brazil and other countries in South America, as well as China, India and Southeast Asia, Mexico, Turkey, Australia, Canada, Poland and other Eastern European countries and South Africa and other countries in Africa. Impressively, Phibro maintains a competitive edge in many of the emerging markets with its established direct presence.

In the first half of fiscal 2025, sales grew 16.1% in Latin America and Canada, 12.9% in Europe, Middle East and Africa and 16.9% in Asia Pacific. With its operations, sales, marketing and distribution spanning more than 80 countries, Phibro is well-positioned to capitalize on global growth opportunities.

Phibro’s Upbeat Fiscal ’25 Outlook

In October 2024, Phibro acquired its competitor, Zoetis’ MFA portfolio, along with certain water-soluble products and related assets. The purchase naturally complements the company’s existing MFA business, adding more than 37 product lines sold across 80 countries, six manufacturing sites in the United States, Italy and China and a team of more than 300 employees supporting manufacturing and distribution activities. The new MFA portfolio is expected to enhance profitability, improve the EBITDA margin and be accretive to its adjusted earnings per share (EPS). It also diversified and broadened Phibro’s portfolio globally.

The company expects to deliver a rapid deleveraging profile with this acquisition, targeting a net leverage of below 3.0X before the end of fiscal year 2027. This will free up resources to fund future investment in additional fast-growing animal health product categories, including companion animal. In the second quarter of fiscal 2025, MFA and other product sales surged 47% year over year, with the Zoetis MFA portfolio contributing $36.7 million in sales in two months. Animal Health adjusted EBITDA also climbed 48%, reflecting strong growth.

At the same time, Phibro’s new income growth initiative is already driving performance gains. Named Phibro Forward, the program focuses on unlocking new growth revenue drivers and cost efficiencies through strategies like potential price increases, expanded product offerings, procurement initiatives and other cost-saving measures. While the full impact of the Phibro Forward program will unfold in the upcoming fiscal years, its early benefits are already reflected in the company’s solid guidance for fiscal 2025. Additionally, the addition of Zoetis’ MFA portfolio further bolsters this outlook.

Phibro expects total sales to grow 23%-28%, with total adjusted EBITDA increasing 55% to 62%. Adjusted net income is projected to increase 57% to 70%, alongside a 57% to 69% surge in adjusted diluted EPS.  

PAHC Stock Displays Technical Strength

From a technical standpoint, PAHC shares have been trading above the 200-day simple moving average (SMA), signaling a long-term bullish trend. At its current price of $21.51, the stock has also jumped nearly 77% from its 52-week low of $12.17.

PAHC Above 200-Day SMA

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Final Thoughts on PAHC

Phibro’s legacy MFA franchise is poised to sustain the sales momentum, backed by strong international demand for its products. The addition of Zoetis’ MFA portfolio further diversifies its product lineup and market reach, bolstering its growth prospects. With its operations spanning 80 countries, the company is well-placed to capitalize on global growth opportunities. Moreover, Phibro’s revised targets for the fiscal year instill optimism for its growth trajectory, making it beneficial for existing shareholders to stay invested. Given its discounted valuation and strong one-year performance, the stock presents a solid investment option for those interested in the animal health market.

Phibro sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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