Over the last six months, Envista shares have sunk to $15.51, producing a disappointing 18.5% loss - worse than the S&P 500’s 8.1% drop. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Envista, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Despite the more favorable entry price, we're swiping left on Envista for now. Here are three reasons why NVST doesn't excite us and a stock we'd rather own.
Why Do We Think Envista Will Underperform?
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE:NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
1. Constant Currency Revenue Hits a Standstill
Investors interested in Dental Equipment & Technology companies should track constant currency revenue in addition to reported revenue. This metric excludes currency movements, which are outside of Envista’s control and are not indicative of underlying demand.
Over the last two years, Envista failed to grow its constant currency revenue. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Envista might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Envista, its EPS declined by 16.4% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Envista’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
We see the value of companies helping consumers, but in the case of Envista, we’re out. Following the recent decline, the stock trades at 14.1× forward price-to-earnings (or $15.51 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.
Stocks We Like More Than Envista
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