Dentsply Sirona’s stock price has taken a beating over the past six months, shedding 46.9% of its value and falling to $12.92 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Is there a buying opportunity in Dentsply Sirona, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Even with the cheaper entry price, we're swiping left on Dentsply Sirona for now. Here are three reasons why you should be careful with XRAY and a stock we'd rather own.

Why Do We Think Dentsply Sirona Will Underperform?

With roots dating back to 1877 when it introduced the first dental electric drill, Dentsply Sirona (NASDAQ:XRAY) manufactures and sells professional dental equipment, technologies, and consumable products used by dentists and specialists worldwide.

1. Constant Currency Revenue Hits a Standstill

We can better understand Dental Equipment & Technology companies by analyzing their constant currency revenue. This metric excludes currency movements, which are outside of Dentsply Sirona’s control and are not indicative of underlying demand.

Over the last two years, Dentsply Sirona failed to grow its constant currency revenue. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Dentsply Sirona might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Dentsply Sirona, its EPS declined by 7.4% 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. Previous Growth Initiatives Have Lost Money

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Dentsply Sirona’s five-year average ROIC was negative 7.8%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

Final Judgment

Dentsply Sirona doesn’t pass our quality test. After the recent drawdown, the stock trades at 6.8× forward price-to-earnings (or $12.92 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward the most entrenched endpoint security platform on the market.

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