Looking for a stock you can really get your teeth into? OK, that was a pretty cheap lead, but it’s still appropriate for the dynamic medical devices company Dentsply International (NASDAQ:XRAY).
Dentsply, up 24.85% in October and down only slightly since Nov. 1, is a world leader in the products used by dentists and orthodontists, with over $2.2 billion a year in sales of dental procedure consumables, lab equipment and specialty products.
While Dentsply was originally founded in 1899 as a producer of artificial teeth and consumable products, the company’s current incarnation is the result of the acquisition of Dentsply International by Gendex, a leader in X-ray imaging, two decades ago. The merger created a global dental products powerhouse with a reputation for heavy research and development that has spawned significant innovations.
The global market for dental products is up to $20 billion, and about three-quarters of the total is consumables. The market is highly fragmented, with the top 10 companies fighting for 60% of the market. Morningstar analysts believe that Dentsply’s strong brand name and diverse product selection has provided a strong economic barrier to entry and pricing power.
In June, Dentsply acquired Astra Tech — the dental implant division of AstraZeneca (NYSE:AZN) — for $1.6 billion. The move showed the firm is focused on expanding with strategic acquisitions of companies with products that can plug right into its vast distribution networks.
While the dental industry has weathered past recessions well, Dentsply has a few issues. The most important is that dental crowns and dentures, which are only partly covered by dental insurance, will be hit hard if the economy dips again. Second, the company’s revenues are susceptible to a weak business cycle — meaning it may have to spend increasingly more on innovation to maintain its current level of business. That could erode earnings.
Other factors play to Dentsply’s advantage: The U.S. population is aging, causing more demand for dental work. There has been a steady increase over the last decade for cosmetic treatments. And there are growing needs for dental products and procedures in emerging markets where people with rising incomes want to take better care of their teeth.
In the past year, Dentsply shares have been through the wringer, and many analysts believe it has the pieces in place to resume a strong advance. My model has liked XRAY for several months in a row, and now it appears to have the wind at its back for a move back toward its 2007 high at $45.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here