Patterson Companies, Inc.

Analysts are looking for high single-digit earnings growth over the next couple years, and the company also began paying a dividend in 2010.

Although the stock risen with the overall market since September 1, shares are still reasonably priced with a PEG ratio of 1.2.

Company Description

Patterson Companies, Inc. distributes various equipment and supplies to the dental, companion-pet veterinarian and rehabilitation markets. The company was founded in 1877 and is headquartered in St. Paul, Minnesota.

It has a market cap of $4.1 billion.

Second Quarter EPS In-Line

Patterson reported second quarter 2011 earnings per share of 45 cents, in-line with the Zacks Consensus Estimate. It was an 8% increase year-over-year.

Total sales were up 5% over the same quarter last year. The Dental Supply division was also up 5%, driven by a 14% increase in dental equipment and software. Revenues from the Webster Veterinary segment were up slightly.

Meanwhile, the gross margin declined slightly from 32.7% to 32.6% of sales, while the operating margin improved slightly from 10.4% to 10.5%.

Outlook

Estimates have been moving higher recently following one analyst's upgrade. Based on a proprietary survey, he believes that patient volumes will accelerate in 2011 and 2012, thus boosting dental equipment purchases.

The Zacks Consensus Estimate for 2011 is $1.95, representing 9% growth over 2010 EPS. This falls within management's guidance of $1.89 to $1.99 per share.

The consensus estimate for 2012 is currently $2.13, corresponding to 9% growth. It is a Zacks #2 Rank (Buy).

Fundamentals

The stock has risen more than 30% since late August.

Shares are trading at 17.0x forward earnings, a discount to the industry average of 19.4x. It sports a PEG ratio of 1.2.

Its price to book ratio of 2.7 is in-line with its peers.

Patterson began paying a dividend in 2010. It currently yields 1.3%.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.