Does Dental Sector's Kick In The Teeth Offer Any Opportunities?

by: Brian Gorban

In these tough economic times, many people are foregoing purchases they otherwise used to make as they struggle to pay off their mortgage, fill up their gas tank, and / or put food on the table. One worrisome trend is the people foregoing the once routine dental check-ups, since there is so little money to go around. In fact, this past week, the news outlet of the California Healthcare Foundation reported that in some areas, dentists have seen business drop 25-30% from levels just three years ago. Therefore, is there money to be made in dental stocks that offer a cheaper alternative to the general public? Here are the stocks I found which predominately work in the dental sector:

Henry Schein (NASDAQ:HSIC) distributes healthcare products and services primarily to office-based healthcare practitioners. It offers higher priced dental products, such as x-ray equipment and dental implants, which I think is not the best place to be in when people are struggling to pay for simple cleanings. Moreover, the company is trading at a trailing 19x P/E, 16x forward P/E, .8x P/S and EV/S, and 1.3x PEG. It's neither cheap nor expensive, but pays no dividend-- so I don't see an immediate reason to jump in.

DENTSPLY International (NASDAQ:XRAY) designs, develops, manufactures, and markets dental consumable products, dental laboratory products, and dental specialty products worldwide. This operates in the dental aesthetics arena, which is more of a luxury than a necessity, so I'm not too bullish on this. The stock trades at a trailing 20x P/E, forward 17x P/E, 2.4x P/S, 2.5x EV/S, 1.5x PEG, and .6% dividend yield. The company is sitting right near a high, so I wouldn't be in any rush to buy. However, it has great operating performance with well over $300M in FCF this past year, allowing for possible future dividend hikes.

White Smile Global (WSML.OB) is an oral health and teeth whitening manufacturer headquartered in South Beach, Miami Florida. The Company focuses its attention around new patent pending products designed by renowned scientist and cosmetic dentist Dr. Martin S. Giniger DMD, PhD, MsD, FICD. This is a company where the financials haven't been pretty, but there seems to be a catalyst as it just announced a patent for its daily oral health system. This can prove lucrative as it offers a cheaper alternative than going to the dentist for cleanings, which has become expensive as more and more people don't have dental insurance. Moreover, it's encouraging that Dr. Giniger received restricted stock, rather than all-cash for these five patents related to the oral health system per the the Oct. 25 8-K SEC filing. This is for the aggressive growth investor.

Sirona Dental Systems (NASDAQ:SIRO), together with its subsidiaries, develops, manufactures, and markets dental equipment for dentists worldwide. Similar to HSIC, this company deals with higher priced dental equipment which faces headwinds with the economic turmoil. Moreover, this trades at a trailing 21x P/E, forward 15x P/E, 1x PEG, 3.1x P/S and EV/S, and no dividend. Again, with no dividend, and no compelling value at these levels, I don't see a solid buy here, but the company has been performing well.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.