On Monday, Baird made an adjustment to the price target of Envista Holdings Corp . (NYSE:NVST) shares, bringing it down to $17.00 from the previous $19.00, while maintaining a Neutral rating on the stock.
The firm highlighted a valuation concern, noting that Envista's shares are trading at nearly 16 times the next twelve months' (NTM) earnings per share (EPS) estimate of $1.00, which spans from the third quarter of 2024 through the second quarter of 2025. This valuation is higher than what the buy-side might anticipate, considering they may be using overestimated figures for the coming years.
The analyst from Baird compared Envista's situation with that of Henry Schein Inc. (NASDAQ:HSIC), which is currently trading at a 13 times NTM price-to-earnings (P/E) multiple.
The firm expressed confidence in Henry Schein's ability to continue delivering earnings growth over the next two years, a period during which Envista may face challenges in maintaining stable EPS, anticipated to be in the low $1.00 range. This contrast in performance and valuation metrics led Baird to upgrade Henry Schein to an Outperform rating, while Envista's rating remained unchanged.
The report suggests that the market's expectations for Envista may be set too high based on the "Street's too-high numbers" for the next couple of years. The analyst's updated estimates for 2024 and 2025 take into account these considerations and the potential for Envista to struggle in holding its EPS stable, as opposed to Henry Schein, which seems poised for consistent growth.
Envista Holdings Corp., which operates in the dental industry, has been under scrutiny by Baird as it evaluates the company's financial projections and market position relative to its competitors. The firm's decision to lower the price target reflects a cautious outlook on Envista's earnings potential and stock performance in the near future.
The update from Baird comes as investors continue to assess the value and growth prospects of companies within the healthcare sector, with particular attention to their earnings multiples and the ability to sustain or increase profitability in a competitive market landscape.
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