Amidst the daily fluctuations of the stock market, Dentsply Sirona Inc (XRAY, Financial) has recently shown a gain of 3.51%, contrasting with a 3-month loss of 17.17%. With a reported Loss Per Share of $1.01, investors are keen to understand whether the stock is modestly undervalued, as suggested by the GF Value. This article delves into the valuation analysis of Dentsply Sirona, providing insights that every value investor should consider.
Company Introduction
Dentsply Sirona Inc (XRAY, Financial), a titan in the dental equipment and supplies industry, emerged from the 2016 merger of Dentsply International and Sirona Dental Systems. The company's extensive portfolio ranges from dental consumables and lab products to cutting-edge CAD/CAM and imaging technology. With a market cap of $6.60 billion and sales reaching $3.90 billion, Dentsply Sirona distributes its products through a blend of third-party distributors, direct salesforce, and consumer sales. The stock's current price of $30.99, when juxtaposed with the GF Value of $41.64, raises the question of whether the stock is trading below its fair value.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. Dentsply Sirona (XRAY, Financial) currently appears modestly undervalued according to this valuation method. The stock's price is below the GF Value Line, suggesting that it may offer higher future returns compared to its current market performance.
Given Dentsply Sirona's undervaluation, the long-term return of its stock is expected to surpass its business growth, indicating a potentially lucrative opportunity for investors.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Assessing a company's financial strength is crucial to avoid the risk of permanent capital loss. Dentsply Sirona's cash-to-debt ratio of 0.15 is lower than 89.56% of its peers in the Medical Devices & Instruments industry, indicating potential concerns regarding its debt management. Despite this, the company's overall financial strength is rated as fair, with a score of 5 out of 10.
Profitability and Growth
Investing in profitable companies is generally less risky, and Dentsply Sirona's consistent profitability over the past decade underscores its investment appeal. The company's operating margin of 7.39% positions it well within its industry, and its profitability rank is a solid 6 out of 10. However, Dentsply Sirona's growth metrics, such as a 3-year average annual revenue growth of 0.5%, indicate slower expansion compared to industry counterparts, affecting its long-term valuation.
ROIC vs WACC
Evaluating a company's value creation involves comparing its Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC). Dentsply Sirona's ROIC of 4.57 is currently below its WACC of 9.01, suggesting that the company may not be generating sufficient returns on its investments.
Conclusion
In conclusion, the evidence points towards Dentsply Sirona (XRAY, Financial) being modestly undervalued. The company maintains fair financial health and profitability, yet its growth and value creation metrics suggest there may be challenges ahead. For a deeper understanding of Dentsply Sirona's financial journey, investors are encouraged to review its 30-Year Financials.
To discover high-quality companies that may deliver above-average returns, please visit the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
