HSIC - Embedded Expectations Analysis - 2020 05 12
Henry Schein, Inc. (HSIC:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 16.3x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about market growth, supply chain issues, and dental service closures in ChinaSpecifically, management may be concerned about their entry into the Nordic dental market, and they may lack confidence in their ability to sustain operating margin growth and drive non-cannibalizing growth in the Dental Service Organization (DSO) market. In addition, they may be exaggerating the stability of the DSO market, their ability to mitigate COVID-19 headwinds, and the capabilities of Dentrix QuickBill. Moreover, they may have concerns about the potential of new product launches, manufacturers supply chain issues, and the continued closure of dental services in China. Furthermore, they may lack confidence in their ability to enhance Dentrix Ascend and execute Henry Schein One opportunities
Schein (Henry) provides health care products and services to office-based dental and medical practitioners. The health care distribution segment distributes consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins. The company's technology group offerings include practice management software systems for dental and medical practitioners. The company's practice solutions include financial services on a non-recourse basis, e-services, practice technology, network and hardware services, and continuing education services for practitioners.
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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