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Bleak Outlook for Medical Dental Supplies Industry
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The Zacks Medical - Dental Supplies industry primarily comprises of designers, developers, manufacturers and marketers of dental consumables, dental laboratory products and dental specialty items. It also includes companies offering practice management and clinical software, patient education systems, and office forms and stationery.
Digital Influence: The latest technologies help dentists carry out minimally-invasive procedures that ensure precision and efficiency, thereby minimizing patients’ trauma. The industry participants actively promote digital workflows for general dentistry as well as dental specialties. Also, dental 3D printers are revolutionizing dentistry. They reduce time and cost through efficient utilization of orthodontics and dental practices. In fact, dental 3D printers are poised to become a trend in 2020. For instance, DENTSPLY SIRONA has launched a single tooth replacement solution, Azento, in the United States to revolutionize digital-implant workflow in dental care.
AI & Robotics: AI has been shaping the dental industry for quite some time now. This decade is expected to see the rise of computing power, which is more accessible and affordable for dental practitioners. It will transform the way dentists work and patients receive treatment, especially with the introduction of robot dentists. Robots are now able to perform minimally-invasive dental work like filling cavities and extracting teeth. A report by National Business Capital & Services suggests that AI dentistry had already become mainstream by 2019-end.
Reimbursement Challenges: The dental industry is facing increasing reimbursement challenges. Notably, in response to the stress to reduce the cost of dental coverage, some insurance companies have cut back on reimbursement rates, often resulting in reduced profit margins for dental practices. Thus, insurance-driven patients pose a challenge for the industry.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Medical Dental Supplies industry falls within the broader Zacks Medical sector.
It carries a Zacks Industry Rank #149, which places it in the bottom 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few dental supplies stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms S&P 500 and Sector
The industry has underperformed the Zacks S&P 500 composite and its own sector in the past year.
Stocks in this industry have collectively lost 2.1% compared with the Zacks Medical sector’s rally of 3.7% and against the S&P 500’s rise of 22.2%.
One Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 18.26X compared with the S&P 500’s 19.41X and the sector’s 21.53X.
Over the last five years, the industry has traded as high as 19.99X, as low as 13.7X, and at the median of 16.67X, as the charts below show.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
Bottom Line
ResearchAndMarkets predicts that the global dental market will reach a worth of $35.7 billion by 2023, at a CAGR of 5.6%. Despite reimbursement challenges, factors like increasing demand for oral hygiene services, technological advancements like laser dentistry, aging population, higher disposable income and changing lifestyles drive the market.
DENTSPLY SIRONA (XRAY - Free Report) : This company is a global leader in the design, development, manufacture and marketing of dental consumables, dental laboratory products, dental specialty products and consumable medical device products. The launch of Azento, the company’s single tooth replacement solution deserves mention here.
The stock has rallied 33% in a year’s time. The medical dental supplies player has an estimated long-term earnings growth rate of 11.8%. The company has surpassed estimates in the last three quarters, the average positive earnings surprise being 14.2%.
Price and Consensus: XRAY
Patterson Companies (PDCO - Free Report) : Patterson is one of the leading distributors of dental and animal health products. The company’s Dental segment distributes consumable products (x-ray film, restorative materials, sterilization products and hand instruments); basic and advanced technology dental equipment; practice management and clinical software; patient education systems; and office forms and stationery in the United States and Canada. Its broad product spectrum includes products like Crosstex DentaPure, Midwest Burs and 3M RelyX.
The stock has declined 0.1% in a year’s time. The medical dental supplies player has an estimated long-term earnings growth rate of 6.4%. The company has surpassed estimates in the last three quarters, the average positive earnings surprise being 3%.
Price and Consensus: PDCO
McKesson Corporation (MCK - Free Report) : California-based McKesson is a distributor of branded and generic pharmaceutical drugs and healthcare products. The company also provides enterprise-wide clinical, patient care, financial, supply chain, and strategic management software solutions.
Among dental products, the company’s Enamel Pro, Fluoride Varnish and Sparkle V deserve a mention.
The stock has rallied 24.9% in a year’s time. The medical dental supplies player has an estimated long-term earnings growth rate of 7.1%. The company has surpassed estimates in the last three quarters, the average positive earnings surprise being 4.3%.
Price and Consensus: MCK
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Bleak Outlook for Medical Dental Supplies Industry
The Zacks Medical - Dental Supplies industry primarily comprises of designers, developers, manufacturers and marketers of dental consumables, dental laboratory products and dental specialty items. It also includes companies offering practice management and clinical software, patient education systems, and office forms and stationery.
Some key players in this space are Becton Dickinson (BDX - Free Report) , AmerisourceBergen Corporation , Cardinal Health (CAH - Free Report) , Cooper Companies (COO - Free Report) , Henry Schein (HSIC - Free Report) , Laboratory Corporation of America Holdings (LH - Free Report) and Align Technology (ALGN - Free Report) .
Here are the three major industry themes:
Zacks Industry Rank Indicates Dull Prospects
The Zacks Medical Dental Supplies industry falls within the broader Zacks Medical sector.
It carries a Zacks Industry Rank #149, which places it in the bottom 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few dental supplies stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms S&P 500 and Sector
The industry has underperformed the Zacks S&P 500 composite and its own sector in the past year.
Stocks in this industry have collectively lost 2.1% compared with the Zacks Medical sector’s rally of 3.7% and against the S&P 500’s rise of 22.2%.
One Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 18.26X compared with the S&P 500’s 19.41X and the sector’s 21.53X.
Over the last five years, the industry has traded as high as 19.99X, as low as 13.7X, and at the median of 16.67X, as the charts below show.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
Bottom Line
ResearchAndMarkets predicts that the global dental market will reach a worth of $35.7 billion by 2023, at a CAGR of 5.6%. Despite reimbursement challenges, factors like increasing demand for oral hygiene services, technological advancements like laser dentistry, aging population, higher disposable income and changing lifestyles drive the market.
Here we present three stocks from the Medical - Dental Supplies industry with a Zacks Ranks of #2 (Buy) and positive long-term growth earnings growth rate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DENTSPLY SIRONA (XRAY - Free Report) : This company is a global leader in the design, development, manufacture and marketing of dental consumables, dental laboratory products, dental specialty products and consumable medical device products. The launch of Azento, the company’s single tooth replacement solution deserves mention here.
The stock has rallied 33% in a year’s time. The medical dental supplies player has an estimated long-term earnings growth rate of 11.8%. The company has surpassed estimates in the last three quarters, the average positive earnings surprise being 14.2%.
Price and Consensus: XRAY
Patterson Companies (PDCO - Free Report) : Patterson is one of the leading distributors of dental and animal health products. The company’s Dental segment distributes consumable products (x-ray film, restorative materials, sterilization products and hand instruments); basic and advanced technology dental equipment; practice management and clinical software; patient education systems; and office forms and stationery in the United States and Canada. Its broad product spectrum includes products like Crosstex DentaPure, Midwest Burs and 3M RelyX.
The stock has declined 0.1% in a year’s time. The medical dental supplies player has an estimated long-term earnings growth rate of 6.4%. The company has surpassed estimates in the last three quarters, the average positive earnings surprise being 3%.
Price and Consensus: PDCO
McKesson Corporation (MCK - Free Report) : California-based McKesson is a distributor of branded and generic pharmaceutical drugs and healthcare products. The company also provides enterprise-wide clinical, patient care, financial, supply chain, and strategic management software solutions.
Among dental products, the company’s Enamel Pro, Fluoride Varnish and Sparkle V deserve a mention.
The stock has rallied 24.9% in a year’s time. The medical dental supplies player has an estimated long-term earnings growth rate of 7.1%. The company has surpassed estimates in the last three quarters, the average positive earnings surprise being 4.3%.
Price and Consensus: MCK
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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