Sirona Dental Systems, Inc. (SIRO), Patterson Companies, Inc. (PDCO): It’s Time to Buy This High-Growth Health-Care Stock

Omnicam’s ticket price is higher than Bluecam, but its costs are, too. In its conference call, Sirona outlined that while gross profits are similar for the two products, margins are lower on Omnicam because of those higher costs. In other words, the acceleration in Omnicam purchases is likely to create profit growth at margins’ expense. That’s not a big deal as long as profits are still growing strong.

Second, margins in imaging usually bounce around for Sirona, so the decline this past quarter shouldn’t be worrying. It owed to changes in the product mix. Moreover, despite the decline in Sirona’s treatment center margins, they remain above its targeted figure of 40%.

And finally, potential investors need not worry too much about small movements in margins with treatment centers and instruments sales, because they only make up around 20% of gross profits at Sirona.

Source: company accounts.

Where next for Sirona Dental?

In conclusion, the margin declines at Sirona are really not a big deal, and the company’s long-term plans make good sense. Sirona’s distributors are keen to push its new products, and with CAD/CAM penetration rates in the low teens in the U.S. and low-single-digits internationally, its long-term growth prospects look favorable. Sirona Dental Systems, Inc. (NASDAQ:SIRO)’s technology presents a rare way to get exposure to a secular growth trend in a stable industry like dentistry.

Sirona now trades at a relatively cheap valuation compared to where it has been over the last few years.

SIRO Price to Cash Flow TTM data by YCharts

The market reaction looks overdone, and this could be a good time to take a position. Analysts have low-teens growth penciled in for the next few years, and the stock looks attractively priced for its long-term prospects. In fact, I found Sirona compelling enough to buy some shares for myself.

The article It’s Time to Buy This High-Growth Health-Care Stock originally appeared on Fool.com and is written by Lee Samaha.

Lee Samaha has positions in Patterson Companies (NASDAQ:PDCO) and Sirona Dental Systems (NASDAQ:SIRO). The Motley Fool has no position in any of the stocks mentioned. Lee is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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