Sometimes, you can get a fair sense of a company in just a few minutes of perusing press releases and casually reading SEC filings. Other times, you've got to dig a little deeper to see the real value of a company. That may be the case with leading dental company DentsplyInternational
Take this quarter's revenue, for example. OK, 5.9% growth seems all right, but what about that 3.9% growth when you exclude precious metals? Likewise, 6.4% internal growth seems OK, until you see 1.2% growth in the U.S. -- which has more to do with difficult prior-year comparisons (because of some stocking/launch orders) than any fundamental weakness in the market.
It doesn't get easier as you go along, either. Gross margin looks so-so (flat, more or less) until you strip out the precious metals and see nearly a full point of improvement. And don't even get me started on the operating margin line -- it's down 1% from last year as reported, but if you adjust for precious metals and stock option expense, you see a result of 19.5%, versus 17.9% a year ago.
None of this is really high-level stuff. You can get it all from reading the 10-Q and/or listening to the call. The same documents will easily explain the seemingly low return on invested capital last year. But it's still the kind of thing that might slip through a screen or fail an initial "sniff" test. Most investors might not even realize that Dentsply is No. 1 or No. 2 in most of the markets in which it competes.
It's apparently the destiny of the dental industry to get subsumed into larger companies. After all, 3M
Running the numbers through my Value-Matic 5000, I come away thinking that Dentsply is undervalued. Not by much, unfortunately, but still undervalued. While I'm a fan of bigger discounts to fair value that what I see here, I can't quibble with folks who'd think that any discount is good enough for a leading company like Dentsply, especially in such a generally stable and recurrent business.
Brush, floss, rinse, then click:
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Fool contributor Stephen Simpson owns shares of 3M, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Fool has a disclosure policy.
