Is Henry Schein Inc (HSIC) Modestly Undervalued? A Comprehensive Analysis of Its Market Value
Henry Schein Inc (NASDAQ:HSIC) has experienced a daily loss of -2.87%, and a 3-month loss of -10.77%. Despite these losses, the company's Earnings Per Share (EPS) stands at a robust 3.42. This article aims to answer the burning question: Is Henry Schein (NASDAQ:HSIC) modestly undervalued? Continue reading for a detailed valuation analysis of the company.
Company Overview
Henry Schein Inc is a comprehensive solution provider for healthcare professionals, powered by a network of people and technology. The company primarily serves office-based dental and medical practitioners, along with alternate sites of care. Henry Schein operates in two reportable segments; health care distribution and technology & value-added services. The majority of its revenue is derived from the health care distribution segment.
Henry Schein's current stock price is $71.24, with a market cap of $9.30 billion. However, the GF Value estimate of its fair value is $88.46. This discrepancy prompts a deeper exploration into the company's intrinsic value.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock, derived from our unique methodology. The GF Value Line, displayed on our summary page, provides an overview of the fair trading value of the stock. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
We believe the GF Value Line indicates the fair value at which the stock should be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, Henry Schein (NASDAQ:HSIC) is believed to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to review the financial strength of a company before deciding whether to buy its stock. A great starting point for understanding a company's financial strength is looking at its cash-to-debt ratio and interest coverage. Henry Schein's cash-to-debt ratio is 0.07, which is worse than 89.66% of 87 companies in the Medical Distribution industry. Despite this, the overall financial strength of Henry Schein is ranked 6 out of 10, indicating that its financial strength is fair.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Henry Schein has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $12.60 billion and Earnings Per Share (EPS) of $3.42. Its operating margin is 6.65%, which ranks better than 72.22% of 90 companies in the Medical Distribution industry. Overall, the profitability of Henry Schein is ranked 8 out of 10, indicating strong profitability.
Growth is a critical factor in the valuation of a company. Henry Schein's 3-year average revenue growth rate is better than 68.67% of 83 companies in the Medical Distribution industry, while its 3-year average EBITDA growth rate is 4.9%, ranking worse than 65.71% of 70 companies in the same industry. This indicates a mixed growth performance.
ROIC vs WACC
Another way to assess the profitability of a company is to compare its return on invested capital (ROIC) and the weighted average cost of capital (WACC). Over the past 12 months, Henry Schein's ROIC is 9.79, and its WACC is 8.29, indicating a healthy profitability.
Conclusion
In conclusion, Henry Schein's stock is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 65.71% of 70 companies in the Medical Distribution industry. For more information about Henry Schein's stock, check out its 30-Year Financials here.
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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.
This article first appeared on GuruFocus.
