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Shares of Sirona Dental Systems (SIRO - Snapshot Report) reached a 52-week high of $57.36 on Friday, September 28, 2012. The closing price of this dental equipment stock as of September 28, 2012 was $56.96, which represented a solid year-to-date return of 34.3%.

Growth Drivers

Several factors such as solid constant currency growth, a raised fiscal 2012 outlook, portfolio expansion, improvement of distribution network and diversified revenues and geographic base are driving the stock.

On August 3, 2012, Sirona reported third quarter fiscal 2012 results with earnings of 80 cents per share beating the Zacks Consensus Estimate of 78 cents per share. The company witnessed 7% year over year revenue growth (in constant currency terms) to gross of $242 million during the quarter. Growth was led by higher sales of CAD/CAM systems, imaging systems as well as increased revenues from treatment centers.

While Germany significantly contributed to revenues, the rest of the European market remained stable. Non-European markets continued to fuel growth, with robust double-digit growth in Asia-Pacific. The company continues to invest in sales and service infrastructure in high value markets such as Japan and China. Management envisages robust growth in the Chinese market in the near-term.

Based on its momentum in the non-European, non-American markets, management raised its fiscal 2012 expected constant currency revenue growth to a range of 8% to 10% compared with the prior guidance in the range of 6% to 8%.

Sirona expanded its exclusive distribution agreement with Patterson Companies (PDCO - Analyst Report) in the quarter. The company is also well placed in the international market with Henry Schein (HSIC - Analyst Report) being its principally largest distributor and core partner in Europe.

Management asserts that the expansion of its exclusive distribution agreement with Patterson will improve the company’s marketing management by strengthening its go-to-market strategy. The main focus of this agreement is to expand its presence in the U.S. market and thereby increase revenues.

Sirona is progressively expanding its product portfolio, backed by innovation. The company is adequately placed to gain from its first-mover advantage in certain niches. Improvement in the penetration rates for its innovative offerings could be just the catalyst which the company needs to drive growth in the short- as well as long-term.

Earnings Estimate Revision

The Zacks Consensus Estimate for fiscal 2012 increased approximately 1% to $3.06 per share over the last 60 days. The current estimate implies year-over-year growth of 6.14%.

For fiscal 2013, the Zacks Consensus Estimate rose by 0.3% over the same time frame to $3.39 per share, implying year-over-year growth of 11.01%.

Valuation

Sirona looks attractive compared to its peers. The company currently trades at a forward P/E of 18.63x, a 6.9% discount to the peer group average of 20.01x. The price-to-book ratio of 3.31x represents a 2.5% premium to the peer group average of 3.23x.

Sirona has a trailing 12-month ROE of 17.4% compared with the peer group average of 15.1%

About the Company

Spun off from the Siemens Medical Technology Division of Siemens in 1997, Sirona has emerged as a leading innovator and manufacturer of dentistry products. Headquartered in Long Island City, New York, the company operates in more than 135 nations worldwide.

Sirona currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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