XRAY - Embedded Expectations Analysis - 2019 01 11
DENTSPLY SIRONA Inc. (XRAY:USA) is currently trading below recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.2x Uniform P/E. At these levels, the market is expecting Uniform ROA to decline from 26% in 2017 to 16% through 2022, accompanied by 3% Uniform Asset growth going forward, but management is confident about margin improvement initiatives and driving growthSpecifically, management appears confident about their ability to improve margins by reducing headcount in underperforming non-core business units. Additionally, they appear confident about regaining growth in their largest strategic unit, Technologies & Equipment through inventory destocking. Also, they appear confident about their newly-implemented supply chain systems. However, management may be concerned about their ability to successfully restructure their business, given the complexity of their post-merger portfolio. Specifically, they may be worried about their ability to deliver revenue growth while eliminating lower-margin business units. Furthermore, they may be worried about their sales team's ability to produce demand-creation activity. Moreover, management may be overstating their leading position in clinical education. Finally, they may be understating their concerns regarding their ability to continue to reduce costs and realize revenue growth
DENTSPLY SIRONA is a manufacturer of dental products and technologies. The company's Consumables segment is responsible for the design, manufacture, sales and distribution of the company's dental consumable products which include preventive, restorative, endodontic, and dental laboratory products. The company's Technologies and Equipment segment includes responsibility for the design, manufacture, sales and distribution of the company's dental technology and equipment products and healthcare consumable products, including dental implants, computer-aided design/computer-aided manufacturing systems, orthodontic clear aligner products, imaging systems, treatment centers, instruments, and consumable medical device products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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