The Shine at Schein

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Growing up with a dentist for a father -- or is it a father for a dentist? -- can give you a skewed view of the world. I'll spare you the Marathon Man cliches and just say that my after-school duties included some creepy lab work. As a result, I became familiar with medical and dental supplier Henry Schein (Nasdaq: HSIC). Too bad I never parlayed that awareness into a well-timed investment: the firm has gone up in value nearly six times since it hit the low teens in 2000.

Recent year-end numbers show a company that continues to capitalize on its well-known brand, strategic acquisitions, and the world's expanding demand for health-care products. Fourth-quarter sales reached a record $946.9 million, a 27% bump over the same period last year. For the full year, revenues topped $3.3 billion, up 18%, though 3.3% of the increase was owed to the incredible shrinking greenback.

Earnings for the year totaled $3.10 per stub, up 18% from 2002, with the fourth quarter providing $0.79 per share, up 15% from the prior year. The company has used its growing piles of cash to buy back its high-priced shares, as well as make seemingly smart acquisitions, including the purchase of a glove maker and a pair of European dental supply houses. These ought to integrate naturally with the company's core business and help inflate the top line for next year.

Things look good for companies like Schein, which provide consumables, materials, software, and equipment to smaller practices in 125 countries. Similarly, robust results were recently reported by competitors Patterson Dental (Nasdaq: PDCO) and Dentsply International (Nasdaq: XRAY). Let's face it, as populations expand, a steady, increasing demand for health-care supplies is a safe bet, and you could do worse than keep your eye on companies that peddle a variety of disposable products.

At $73 per stub, Schein looks fairly valued. It expects earnings growth of 15% next year, so it currently trades about 20 times those estimates. That puts it at a relative discount to Patterson. The bargain of the trio, however, may be Dentsply, which sports much better margins than the others and trades at an even lower multiple.

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Fool contributor Seth Jayson owns no stake in any companies mentioned here.