Dentsply Sirona: A Fresh Look at This Dental Consumables and Digital Dentistry Leader

We peg Dentsply Sirona’s XRAY fair value estimate at $28 per share. Our model is underpinned by a 5-year sales CAGR of 3.5% with moderate year-over-year margin expansion and a no-moat rating.

Dentsply Sirona is one of the world’s largest manufacturers of dental equipment and supplies. It has a strong presence in dental CAD/CAM, or computer-aided design/computer-aided manufacturing, and has long reaped the benefits as a first mover in the space. However, lucrative economics and consumers’ rising appetite for cosmetic procedures has attracted a large number of competitors over the last decade and put the company on a defensive footing. To adopt and compete in an increasingly fragmented market, Dentsply Sirona has invested more into its CEREC system, the firm’s flagship chairside workflow solutions. It has also focused on expanding its presence in implantology and orthodontic solutions, which we see as two main sources for future growth. In implantology, the firm has invested to build out clinical education and to reinforce its salesforce. In orthodontics, the firm offers SureSmile and has bolstered its portfolio by acquiring Byte, a direct-to-consumer clear aligner provider, in 2021.

On moat, we assign the firm a no-moat rating because we do not believe it possesses any structural advantages sufficient enough to generate excess returns over the next 10 years. The wide adoption of CAD/CAM in dentistry over the last two decades has led to an emergence of new competitors, making the industry highly fragmented and competitive. We think that the growth of lower-priced competitors will continue to erode intangible competitive advantages that specialty players like Dentsply Sirona once possessed. In orthodontics and implantology, we think Dentsply Sirona faces stiff competition and will struggle to displace category leaders. It has worked on innovating its offerings, but we still think its portfolio lacks the technical superiority to merit a moat.