Unveiling Henry Schein (HSIC)'s Value: Is It Really Priced Right? A Comprehensive Guide

Exploring the intrinsic value of Henry Schein (HSIC) based on its financial metrics and market performance

Article's Main Image

Henry Schein Inc (HSIC, Financial), a leading provider of healthcare products and services, has been a subject of interest for many investors. With a daily loss of 1.76% and a 3-month loss of 8.66%, it's worth exploring whether the stock is undervalued. The company's Earnings Per Share (EPS) stands at 3.42, a critical metric in assessing its profitability. This article aims to provide a comprehensive analysis of the intrinsic value of Henry Schein (HSIC) to determine if it's a profitable investment. Let's delve into the financials and market performance of Henry Schein (HSIC).

Company Overview

Henry Schein Inc is a solutions company for healthcare professionals powered by a network of people and technology. The company primarily provides healthcare products and services to office-based dental and medical practitioners, as well as alternate sites of care. It operates in two reportable segments; health care distribution and technology & value-added services. The healthcare distribution segment combines global dental and medical businesses and distributes consumable products, small equipment, laboratory products, and Vitamins. The technology and value-added services reportable segment provides software, technology & other value-added services to health care practitioners. The majority of revenue is derived from the health care distribution segment.


Understanding the GF Value

The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.

Based on this analysis, the stock of Henry Schein (HSIC, Financial) appears to be modestly undervalued. With a current price of $73.21 per share and a market cap of $9.60 billion, the stock's fair value is estimated at $88.09. This suggests that the long-term return of Henry Schein's stock is likely to be higher than its business growth.


Financial Strength

Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Henry Schein has a cash-to-debt ratio of 0.07, which is worse than 89.53% of 86 companies in the Medical Distribution industry. GuruFocus ranks the overall financial strength of Henry Schein at 6 out of 10, which indicates that the financial strength of Henry Schein is fair.


Profitability and Growth

Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Henry Schein has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $12.60 billion and Earnings Per Share (EPS) of $3.42. Its operating margin of 6.65% better than 72.22% of 90 companies in the Medical Distribution industry. Overall, GuruFocus ranks Henry Schein's profitability as strong.

Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Henry Schein is 11.1%, which ranks better than 68.29% of 82 companies in the Medical Distribution industry. The 3-year average EBITDA growth rate is 4.9%, which ranks worse than 63.77% of 69 companies in the Medical Distribution industry.


Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Henry Schein's return on invested capital is 9.79, and its cost of capital is 8.21.



In summary, the stock of Henry Schein (HSIC, Financial) appears to be modestly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks worse than 63.77% of 69 companies in the Medical Distribution industry. To learn more about Henry Schein stock, you can check out its 30-Year Financials here.

To find out the high quality companies that may deliver above average returns, please check out GuruFocus High Quality Low Capex Screener.


I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.