Have you been paying attention to shares of Patterson Companies (PDCO)? Shares have been on the move with the stock up 35.6% over the past month. The stock hit a new 52-week high of $26 in the previous session. Patterson Companies has gained 25.9% since the start of the year compared to the 3.3% move for the Zacks Medical sector and the 8% return for the Zacks Medical - Dental Supplies industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on June 24, 2020, Patterson Cos. reported EPS of $0.43 versus consensus estimate of $0.17 while it beat the consensus revenue estimate by 1.89%.
For the current fiscal year, Patterson Cos. is expected to post earnings of $1.35 per share on $5.34 billion in revenues. This represents a -12.9% change in EPS on a -2.68% change in revenues. For the next fiscal year, the company is expected to earn $1.68 per share on $5.77 billion in revenues. This represents a year-over-year change of 24.26% and 7.99%, respectively.
Patterson Cos. may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Patterson Cos. has a Value Score of A. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 19.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 2.7X versus its peer group's average of 15X. Additionally, the stock has a PEG ratio of 2.8. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Patterson Cos. currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Patterson Cos. passes the test. Thus, it seems as though Patterson Cos. shares could have a bit more room to run in the near term.
How Does Patterson Cos. Stack Up to the Competition?
Shares of Patterson Cos. have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including AmerisourceBergen (ABC), West Pharmaceutical Services (WST), and ResMed (RMD), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Patterson Cos. Still, the fundamentals for Patterson Cos. are promising, and it still has potential despite being at a 52-week high.
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Patterson Companies, Inc. (PDCO): Free Stock Analysis Report
AmerisourceBergen Corporation (ABC): Free Stock Analysis Report
ResMed Inc. (RMD): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.