HSIC - Henry Schein: Acquisition Strategy Isn't Pulling Its Economic Weight
2024-05-23 14:12:52 ET
Summary
- Henry Schein, Inc. came in with flat revenue growth in Q1 FY'24, with most expansion coming from acquisitions.
- The company's capital allocation strategy, focused on acquisitions, is not creating economic value for shareholders in my view.
- Based on my analysis, the company's performance does not justify a higher valuation.
Investment Summary
Henry Schein, Inc. (HSIC) is a company that I’ve become tremendously familiar with over the years, having owned it on and off periodically through various market cycles since 2018. For instance, I had bought it for our portfolios during the 2022 market slump, as a defensive overlay to our equity exposures. Since then though, my sentiment has been flat, neutralized by the lack of economic value HSIC's management is unlocking for the company’s shareholders.
Figure 1.
In the last analysis from October 2023 — right when the broad indices began their rally — my judgement was 1) the market had priced HSIC correctly, and that 2) little upside potential was on offer at current multiples. Based on the company’s latest numbers , little has changed from that view....
Henry Schein: Acquisition Strategy Isn't Pulling Its Economic Weight