Good Long Term Potential With This Healthcare Play – Patterson Companies, Inc. (PDCO): Henry Schein, Inc. (HSIC), IDEXX Laboratories, Inc. (IDXX)

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One interesting aspect about Patterson’s commentary was that it did not see any ‘pull-forward’ effect from customers in Q4 due to fears over possible tax incentive changes to section 179. Henry Schein, Inc. (NASDAQ:HSIC) noted this and suggested there would be some backwash in the next quarter as a consequence. I guess we will find out who is right in a couple of months.

Where Next for Patterson Companies?

On a current EV/EBITDA evaluation of 10x I wouldn’t argue that the stock is particularly cheap. Since the economic recovery began in 2009 the stock has traded within a price band of 1-1.25x revenues. Based on April 2013 revenue estimates of $3.65 billion, this equates to a current share price of between $34 and $40, where the current price is around the mid-point of $37.

Analysts have GDP type top line growth penciled in for the next few years and double digit earnings growth for next year. There is upside potential to this given a stronger economy, and for the reasons articulated above I think longer term prospects are good with the potential for some kicker from M&A activity. It’s not the sexiest of stocks, but these stocks serve a purpose and I think it’s worth a look.

The article Good Long Term Potential With This Healthcare Play originally appeared on Fool.com and is written by Lee Samaha.

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