Shares of Patterson Companies (PDCO, Financial) were plunging as the dental and animal health company announced its fiscal 2025 first-quarter results, with the stock dropping to $21.955, a steep decline of 14.54%.
Patterson reported Q1 revenue of $1.54 billion, down 2.2% year over year. Analysts had anticipated higher revenue of $1.59 billion. The company posted Q1 GAAP earnings of $0.15 per share. Its adjusted earnings per share were $0.24, falling short of the consensus estimate of $0.32.
Patterson Companies' CEO, Don Zurbay, attributed the disappointing fiscal 2025 Q1 results mainly to the impact of the Change Healthcare cybersecurity attack. This cyberattack in February 2024 caused a backlog of unpaid claims affecting many healthcare companies.
The company's companion animal business also faced challenges, with sales of consumables and equipment falling by 3% and 3.8% year over year, respectively. Additionally, the timing of certain corporate expenses contributed to the lower-than-expected results.
From a valuation perspective, PDTCO has a price-to-earnings (PE) ratio of 10.98 and a price-to-book (PB) ratio of 1.97, both indicating a relatively modest valuation compared to industry norms. The GF Value for PDCO is estimated at $31.76, pegging the stock as a possible value trap, meaning investors should think twice before diving in.
Despite the negative sentiment, there are some financial strengths in PDCO's corner. The company boasts an Altman Z-Score of 3.9, which is considered strong. Additionally, Patterson Companies' operating margin is expanding, a positive indicator for profitability.
However, caution is warranted as the Beneish M-Score suggests possible financial manipulation, and the company has a low Piotroski F-Score of 3, which usually implies poor business operations. Over the past 52 weeks, the stock has decreased by 32.6% and shows a year-to-date decline of 20.45%.
In terms of market performance, PDCO's market cap stands at $1.94 billion with a daily trading volume significantly exceeding the average, showing high investor activity. The stock also offers a forward dividend yield of 4.74%, which may attract income-focused investors.
For potential investors, it is vital to weigh the strong financial indicators against the significant risks highlighted by recent financial performance and growth metrics. Given the mixed signals, a comprehensive evaluation aligned with one's risk tolerance and financial goals is essential before making investment decisions.
