Farm to Pharma — Can Phibro (PAHC) Continue to Grow?

We tend to think of pharmaceuticals in the way they relate to us as human beings directly. But they’re also a critical (and often overlooked) part of the food supply chain. Medicines, mineral supplements, antibiotics, dewormers — they’re all necessary, and needed in abundance, to keep the shelves in your supermarket stocked.

That’s the business that Phibro Animal Health (NASDAQ: PAHC), a low-profile small-cap company is in.

PAHC stock carries a Zen Rating of A — on average, stocks that carry that distinction provide an annual return of 32.52%. Over the course of 2024, the price of a Phibro share increased by 77.51%.

On November 6th, the company held its Q1 2025 earnings call — marking the fourth consecutive quarter where the company beat analyst expectations in terms of both revenue and EPS.

While profit-taking did occur after those successful quarters, the stock is in a pretty pronounced uptrend — the lack of any major price dips is what earned it a Safety component grade rating of A.

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Phibro Animal Health also boasts a Value rating of A — however, the stock’s price-to-earnings (P/E) ratio stands at 48.21x — way above the wider market average of 30.41x and the industry average of 7.58x.

So, how can a stock have a P/E ratio almost seven times as high as the average in its industry, and still receive a high Value rating? It’s actually quite simple — even the most diligent among us can’t help but use P/E, both trailing and forward, as a shorthand for valuation — but no single metric provides the full picture.

Think in terms of valuation relative to what — and in the case of PAHC, that “what” is growth. The company’s price-to-earnings growth (PEG) ratio stands at 0.49x — through that lens, Phibro Animal Health is quite severely undervalued.

Now we come to the how and why of PAHC’s Growth rating, which is its third and final component grade rated A. The company’s earnings are forecast to grow at quite the exceptionable rate of 109.23% per year — for reference, the average forecast for the pharmaceutical industry is 21.4%, while the expectation for the wider market is 25.25%.

Revenue, on the other hand, is expected to grow at 13.22% per year. While much less exceptional, the figure still outpaces the industry average forecast of 8.03% and the wider market’s 11.84%.

The key question is whether Phibro will manage to find success with its “Phibro Forward” initiative, first unveiled in the company’s Q4 2024 earnings call in August. While the details are quite sparse, the initiative is focused on cost efficiencies, streamlining operations, driving margin and revenue growth, and includes the possibility of geographic expansion. 

At the tail end of October, the company acquired Zoetis’ (NYSE: ZTS) full medicated feed additive and partial water-soluble product portfolio, sold in approximately 80 countries, for $350 million. The purchased portfolio is estimated to have generated around $400 million in revenue in 2023.  

No, this isn’t a pure value play. But it merits consideration if you have the risk tolerance to wager that Phibro will continue on its current trajectory. The company’s next earnings call is due February 5th.

—> Click here to research PAHC. By the way, remember that Zoetis acquisition? ZTS stock has a B Zen Rating, as well as two “A” Component Grades — so you might want to check it out as well. 

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