Patterson Companies (PDCO) AI Stock Analysis

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Patterson Companies

(NASDAQ:PDCO)

69Neutral

Patterson Companies scores well due to its stable operational efficiency and strong market momentum. However, challenges with profitability and cash flow management slightly dampen its overall performance. The stock's valuation is fair, and its dividend yield is a positive aspect for investors seeking income. Technical indicators suggest strong momentum, though caution is advised due to potential overbought conditions.

Positive Factors

Acquisition

The acquisition is seen as validation of the belief that PDCO's fundamental value was not reflected in its previous trading multiples.

Valuation

The announced acquisition of PDCO by Patient Square Capital for $31.35 per share represents a significant premium to recent trading prices, indicating investor confidence.

Negative Factors

Earnings

Patterson reported weaker-than-expected results in its most recent quarter with adjusted EPS coming in well below estimates.

Market Demand

There are general questions about near-term dental market demand, which could impact future valuations and interest in PDCO.

Patterson Companies (PDCO) vs. S&P 500 (SPY)

Market Cap

$2.74B

Dividend Yield3.36%

Average Volume (3M)1.36M

Price to Earnings (P/E)20.0

Beta (1Y)0.16

Revenue Growth-0.85%

EPS Growth-23.40%

CountryUS

Employees7,600

SectorHealthcare

Sector Strength77

IndustryMedical - Distribution

Share Statistics

EPS (TTM)1.55

Shares Outstanding88,473,850

10 Day Avg. Volume1,302,196

30 Day Avg. Volume1,361,423

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.42

Price to Cash Flow (P/CF)-2.50

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$31.25

Price Target Upside1.30% Upside

Rating ConsensusHold

Number of Analyst Covering3

Patterson Companies Business Overview & Revenue Model

Company DescriptionPatterson Companies, Inc. is a leading distributor in the healthcare sector, focusing on providing a comprehensive range of products and services to the dental and animal health markets. The company operates through two primary segments: Dental and Animal Health. Its offerings include dental consumables, equipment, and software, as well as veterinary supplies and diagnostic products, catering to a broad spectrum of healthcare providers.

How the Company Makes MoneyPatterson Companies generates revenue primarily through the sale of dental and animal health products. In the dental segment, revenue is derived from the sale of consumables, equipment, and technology solutions to dental practices and laboratories. The animal health segment contributes to revenue through the distribution of pharmaceuticals, vaccines, diagnostics, and other health products for both companion and production animals. Patterson Companies also earns income from providing value-added services such as equipment installation, maintenance, and repair, as well as offering software solutions that enhance practice management for healthcare providers. Strategic partnerships with manufacturers and ongoing relationships with healthcare providers further bolster Patterson's revenue streams by ensuring a steady supply of products and fostering customer loyalty.

Patterson Companies Financial Statement Overview

Summary

Patterson Companies demonstrates stable gross profit margins and operational efficiency. The debt-to-equity ratio has improved, suggesting manageable leverage. However, the decline in net profit margin and negative operating cash flow indicate challenges in profitability and cash flow management.

Income Statement

Positive

Patterson Companies shows a stable gross profit margin over the years, currently at 20.5% for TTM. However, the net profit margin has declined to 2.1% from 2.8% in the previous annual report. Revenue growth is minimal over the past years. EBIT and EBITDA margins are stable, indicating consistent operational efficiency despite the declining net income.

Balance Sheet

Positive

The debt-to-equity ratio has slightly improved to 0.58 from 0.76, indicating manageable leverage. The equity ratio is around 35%, suggesting a balanced capital structure. However, return on equity (ROE) has decreased, reflecting a drop in profitability relative to equity.

Cash Flow

Neutral

Operating cash flow is negative, impacting free cash flow negatively. The free cash flow to net income ratio is concerning, indicating cash outflows are not being supported by income. However, the company has seen a reduction in free cash flow deficit over the years.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
6.51B	6.57B	6.47B	6.50B	5.91B	5.49B
	Gross Profit
1.33B	1.38B	1.37B	1.29B	1.20B	1.20B
	EBIT
200.23M	252.92M	275.97M	157.00M	210.61M	126.44M
	EBITDA
323.25M	374.76M	386.14M	367.17M	301.75M	-476.90M
	Net Income Common Stockholders
138.78M	185.93M	207.56M	203.21M	155.98M	-589.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
328.74M	114.46M	159.67M	142.01M	143.24M	77.94M
	Total Assets
2.55B	2.90B	2.88B	2.74B	2.75B	2.72B
	Total Debt
525.00M	762.94M	628.00M	590.23M	721.87M	668.33M
	Net Debt
196.26M	648.48M	468.33M	448.22M	578.62M	590.38M
	Total Liabilities
1.05B	1.90B	1.76B	1.70B	1.79B	1.88B
	Stockholders Equity
1.50B	1.00B	1.12B	1.04B	964.67M	836.44M
Cash Flow		Free Cash Flow
-867.45M	-857.00M	-819.07M	-1.02B	-756.31M	-285.35M
	Operating Cash Flow
-804.60M	-789.38M	-754.85M	-980.99M	-730.52M	-243.54M
	Investing Cash Flow
1.00B	959.54M	901.57M	1.24B	810.66M	499.13M
	Financing Cash Flow
-184.85M	-215.91M	-126.48M	-253.23M	-22.64M	-271.23M

Patterson Companies Technical Analysis

Technical Analysis Sentiment

Negative

Last Price30.85

Price Trends

50DMA

31.10

Negative

100DMA

28.98

Positive

200DMA

25.79

Positive

Market Momentum

MACD

0.07

Positive

RSI

70.78

Negative

STOCH

58.97

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PDCO, the sentiment is Negative. The current price of 30.85 is below the 20-day moving average (MA) of 31.17, below the 50-day MA of 31.10, and above the 200-day MA of 25.79, indicating a neutral trend. The MACD of 0.07 indicates Positive momentum. The RSI at 70.78 is Negative, neither overbought nor oversold. The STOCH value of 58.97 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PDCO.

Patterson Companies Risk Analysis

Patterson Companies disclosed 37 risk factors in its most recent earnings report. Patterson Companies reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Patterson Companies Peers Comparison

Overall Rating

UnderperformOutperform

Sector (48)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MCK	77 Outperform	$85.61B	31.31	51.23%	0.40%	14.29%	-1.20%
BDX	76 Outperform	$59.53B	34.44	6.92%	1.92%	5.89%	42.05%
OHI	74 Outperform	$10.52B	24.85	10.02%	7.18%	9.90%	56.41%
HSIC	70 Outperform	$8.13B	21.45	11.07%	―	2.71%	-3.26%
PDCO	69 Neutral	$2.74B	19.95	14.15%	3.36%	-0.85%	-23.40%
CAH	61 Neutral	$31.31B	24.20	-43.80%	1.56%	2.85%	110.82%
Sector *	48 Neutral	$6.36B	1.14	-49.00%	2.63%	17.14%	1.39%

* Healthcare Sector Average

Performance Comparison

PDCO

Patterson Companies

30.94

5.58

22.00%

BDX

Becton Dickinson

207.34

-30.23

-12.72%

CAH

Cardinal Health

129.63

22.08

20.53%

HSIC

Henry Schein

65.47

-7.00

-9.66%

MCK

McKesson

661.97

132.19

24.95%

OHI

Omega Healthcare

37.34

7.62

25.64%

Patterson Companies Earnings Call Summary

Earnings Call Date: Feb 26, 2025 | % Change Since: -0.71% | Next Earnings Date: Jun 25, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with positive developments in the Animal Health segment and strategic acquisitions, alongside significant challenges in the Dental segment and impacts from a cybersecurity attack. The company's efforts in cost management and strategic investments are overshadowed by the need to revise fiscal guidance due to ongoing market pressures.

Highlights

Animal Health Segment Growth

Internal sales for the fiscal second quarter increased approximately 2% year-over-year, driven by mid-single-digit growth in the production animal business.

Strategic Acquisitions in Animal Health

Patterson announced two acquisition agreements: Infusion Concepts and Mountain Vet Supply, strengthening their position in the companion and production animal markets.

Cost Management Actions

Patterson implemented dedicated cost management actions, expecting to generate annual cost savings of approximately $16 million.

Investment in Software and Services

Investments were made in new features for Fuse, Eaglesoft, and Dolphin to enhance dental practice efficiency.

Lowlights

Dental Equipment Sales Decline

Internal sales in Dental Equipment decreased approximately 8% year-over-year, with notable declines in digital equipment and CAD/CAM categories.

Impact of Change Healthcare Cybersecurity Attack

The cybersecurity attack led to a decline in internal sales in the dental value-added services category by nearly 3%.

Revised Fiscal 2025 Guidance

Guidance was revised due to expected persistent pressures across the dental industry, with GAAP earnings guidance adjusted to $1.83 to $1.93 per diluted share.

Decreased Gross Margin

The GAAP gross margin for the second quarter was 19.6%, a decrease of 90 basis points compared to the prior year period.

Company Guidance

During the Patterson Companies Q2 2025 earnings call, the company revised its fiscal 2025 guidance, reflecting adjusted expectations across its end markets. The revised guidance anticipates adjusted earnings per share (EPS) in the range of $2.25 to $2.35, down from earlier projections, with a focus on managing pressures in the dental industry. Factors influencing this guidance include a 1% year-over-year increase in internal sales, driven by the Animal Health segment, while dental equipment sales faced an 8% decline. The company also reported $16 million in expected annual cost savings from organizational realignment. With these adjustments, Patterson aims to drive revenue growth, enhance margin performance, and continue investing in strategic growth opportunities despite ongoing macroeconomic challenges.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.