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David Blood and Al Gore’s Generation Owns 5.1% of Henry Schein, Inc. (HSIC)

Other companies which sell and distribute medical equipment include Patterson Companies, Inc. (NASDAQ:PDCO), Owens & Minor, Inc. (NYSE:OMI), MWI Veterinary Supply, Inc. (NASDAQ:MWIV), and McKesson Corporation (NYSE:MCK). This peer group is characterized by high earnings multiples as well, as markets look for high growth. MWI Veterinary Supply, Inc. (NASDAQ:MWIV) is valued at 28 times trailing earnings, though it did report double-digit growth rates on both top and bottom lines in its most recent quarter compared to the same period in the previous year. We’d also noted in our look at Henry Schein that its animal health unit was a strong point, so MWI does merit something of a premium to these other companies in our view.

The other three peers we listed carry trailing P/Es in the 20-21 range, roughly in line with where Henry Schein, Inc. (NASDAQ:HSIC) trades. McKesson Corporation (NYSE:MCK) experienced a steep decline in its earnings in fiscal Q4 (which ended in March) from levels a year earlier, but the sell-side apparently expects the company to recover and as a result it’s priced at only 13 times forward earnings estimates. Patterson Companies, Inc. (NASDAQ:PDCO) and Owens & Minor, Inc. (NYSE:OMI) have both been seeing very light revenue growth, so as with Henry Schein we wouldn’t count them on growing fast enough going forward to justify their current valuations.

The industry as a whole seems to be pricing in quite aggressive growth compared to recent results. McKesson Corporation (NYSE:MCK) is the only company here which could qualify as a value, and even then it would be because of optimistic analyst projections; with the business struggling recently, we’d avoid it. MWI Veterinary Supply, Inc. (NASDAQ:MWIV) has been growing nicely, as we’ve seen, and might be worth looking into if it can continue that trend for another quarter or so, but at this point its earnings multiple would keep us from buying as well.

Disclosure: I own no shares of any stocks mentioned in this article.

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