Is Now An Opportune Moment To Examine Henry Schein, Inc. (NASDAQ:HSIC)?

By
Simply Wall St
Published
January 24, 2022
NasdaqGS:HSIC
Source: Shutterstock

Today we're going to take a look at the well-established Henry Schein, Inc. (NASDAQ:HSIC). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$80.54 at one point, and dropping to the lows of US$70.34. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Henry Schein's current trading price of US$73.54 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Henry Schein’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Henry Schein

What's the opportunity in Henry Schein?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Henry Schein’s ratio of 16.29x is trading slightly below its industry peers’ ratio of 19.86x, which means if you buy Henry Schein today, you’d be paying a decent price for it. And if you believe Henry Schein should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Henry Schein’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Henry Schein generate?

earnings-and-revenue-growth
NasdaqGS:HSIC Earnings and Revenue Growth January 24th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Henry Schein. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? HSIC’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at HSIC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on HSIC, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for HSIC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Diving deeper into the forecasts for Henry Schein mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Henry Schein, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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