Sunday, May 20, 2012

Sirona Dental Systems Research

Sirona Dental Systems (NASDAQ: SIRO) is a dental healthcare stock which is exposed to favorable demographic tailwinds and the expansion of the rollout of its global leading technology.  The evaluation and prospects look compelling and, there is upside potential to the stock price.

Sirona's Profit Drivers

Sirona has two key earnings drivers.

First, consider the ageing demographic. As people get older they require more teeth maintenance. Furthermore, as people tend to have more teeth decay as they are older, dentists can expect more restoration work. Ultimately, Sirona should see more demand for its products. 
Secondly, its proprietary technology currently has low market share and, provides dentists with many cost and quality advantages.

Whilst the demographic argument is well worn in healthcare plays, it should carry more weight with Sirona because of a relative lack of insurance reimbursement issues with dentistry products and solutions. Indeed, the industry is shifting towards private from public pay and, much of what Sirona does is aimed at the high end market.

The company is very well run and a global technology leader. Sirona spends around six to seven percent on research and development every year and is investing $15m in setting up a major new innovation centre in Bensheim, Germany. The balance sheet is solid, having seen the company engage in deleveraging the business over the last few years. Sirona is now in a position to make some acquisitions and, I would expect some activity on this front. Sirona has its origins as a spin off from German industrial giant Siemens (NYSE: SI)

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