The COVID-19 pandemic had a huge, negative impact on the dental care and services market last year. But the industry is now recovering at a fast pace as solid progress on the vaccination front has been driving a gradual return to in-office dental checkups, which were deferred for an extended period. In addition, increasing consumer spending and extensive government spending to strengthen healthcare infrastructure are expected to create a conducive environment for further industry growth.
Growing demand for cosmetic dental surgeries, technological advancements, and an aging population are projected to boost the growth of the dental care and services market. The global dental equipment market is expected to reach $5.4 billion by 2028, registering a 12.1% CAGR.
Considering the rapid advancement in dental procedures and substantial rise in dental hygiene appointments, we believe dental companies Align Technologies (ALGN), Dentsply Sirona Inc. (XRAY), and Henry Schein Inc. (HSIC) are well-positioned to witness robust demand for their products and services. Thus, these stocks could be ideal bets now.
Align Technologies Inc. (ALGN)
ALGN, which is based in San Jose, Calif., develops, produces, and sells a system of clear aligner therapy, intra-oral scanners, and computer-aided design/computer-aided manufacturing (CAD/CAM) digital services used in dentistry, orthodontics, and dental records storage. Clear Aligner, and Scanner and Services are the two business segments through which the company operates.
This month, ALGN announced the opening of its new premises in Petach Tikva, Israel, atop one of the three high-rise buildings that make up the “Global Towers.” Through this, the company aims to expand its industry-leading digital capabilities via continuous scanner innovation and solutions and assist more dental professionals across the world in transforming their practices using digital tools and technology.
During the first quarter, ended March 31, 2021, ALGN’s net revenue increased 62.4% year-over-year to $894.78 million. The company’s non-GAAP operating income increased 171.6% year-over-year to $255.79 million over this period. Its non-GAAP net income increased 242.67% year-over-year to $198.4 million, while its non-GAAP EPS grew 241.1% from the prior-year quarter to $2.49.
A $10.4 consensus EPS estimate for the current year represents a 98.1% improvement year-over-year. The $3.81 billion consensus revenue estimate for the current year represents a 54.2% increase from the same period last year. The stock has gained 113.5% over the past year and 35.9% over the past nine months.
ALGN’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ALGN is also rated an A grade for Growth, and a B for Quality and Sentiment. Within the Medical – Devices/Equipment industry, it is ranked #45 of 187 stocks.
To see additional POWR Ratings for Momentum, Stability, and Value for ALGN, click here.
Dentsply Sirona Inc. (XRAY)
XRAY is a dental product and technology manufacturer that is based in York, Pa. The company is involved in developing, producing, and selling dental equipment and dental consumables. Technologies & Equipment, and Consumables are the two segments through which the company operates.
Last month, XRAY acquired Propel Orthodontics through an all-cash $131 million deal. With this acquisition, the company aims to further enhance its position in the fast-growing clear aligner sector.
For the first quarter ended March 31, 2021, XRAY’s non-GAAP net sales increased 17.5% year-over-year to $1.03 billion. The company’s non-GAAP operating income increased 67.2% year-over-year to $219 million. Its net income came in at $117 million for the quarter, compared to a $140 million net loss in the prior-year quarter. Its non-GAAP EPS increased 67.4% year-over-year to $0.72 over this period.
XRAY is expected to witness 27% revenue growth for the current year. Its EPS is estimated to increase 60.3% year-over-year to $2.87 in 2021. Over the past year, XRAY’s stock has gained 44.6%. Furthermore, it has gained 21.5% year-to-date.
XRAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B for Value and Sentiment. In the Medical – Devices/Equipment industry, it is ranked #12 of 187 stocks.
In total, we rate XRAY on eight different levels. Beyond what we’ve stated above, we have also given XRAY grades for Stability, Momentum, and Quality. Get all the XRAY ratings here.
Henry Schein Inc. (HSIC)
HSIC is involved in providing healthcare services to dental practitioners, laboratories, physician practices, government, and institutional healthcare clinics. The company operates through two segments: Healthcare Distribution and Technology and Value-Added Services. HSIC is based in Melville, N.Y.
Last month, HSIC acquired a 70% stake in eAssist Dental Solutions. The move should enable the company to achieve its goal of providing best-of-breed solutions to help dental offices operate more smoothly and efficiently, while allowing them to focus more on patient care.
HSIC’s net sales increased 20.4% year-over-year to $2.92 billion in the first quarter ended March 27, 2021. Its gross profit surged 19.4% year-over-year to $890.85 million. The company’s net income increased 27.4% from its year-ago value to $166 million over this period. And its EPS increased 27.4% year-over-year to $1.16.
The company’s EPS is expected to grow 39.4% year-over-year to $4.14 in the current year. Also, HSIC has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Analysts expect HSIC’s revenue to increase 16% year-over-year to $11.74 billion in its fiscal year 2021. HSIC’s stock has gained 13.1% over the past year and 15.7% year-to-date.
It is no surprise that HSIC has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth, and B for Value, and Quality. In the Medical – Devices/Equipment industry, it is ranked #30 of 187 stocks.
In addition to the POWR Ratings grades I have just highlighted, one can see the HSIC rating for Momentum, Stability, and Sentiment here.
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ALGN shares were trading at $632.56 per share on Monday afternoon, down $5.72 (-0.90%). Year-to-date, ALGN has gained 18.37%, versus a 18.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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