Patterson Companies' Shares Got Crushed: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of dental and veterinary equipment supplier Patterson Companies (NAS: PDCO) are looking snake-bit today, down 11% as of this writing.

So what: Who's to blame? Patterson itself, which this morning announced fiscal Q1 earnings 10% lower than last year.

Now what: And yet the $0.45 that Patterson says it earned (pro forma) was actually a penny ahead of Wall Street's estimates for the company (also pro forma). Is this any way to treat an outperformer? Perhaps not. I have to say that at 14 times earnings, pegged for nearly 12% long-term growth, and paying a 1.7% dividend yield, Patterson shares really don't look that expensive to me. To top it all off, Patterson's cash flow statement clearly shows that it's generating more cash than its reported income suggests -- $269 million worth of cash profits over the past year. The way I look at it, this gives the stock a sub-12x FCF valuation, and makes Patterson actually look pretty cheap.

That pattering sound you hear right now could be opportunity knocking.

Think Patterson's gonna bounce back?Add it to your Watchlist.

At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) Patterson Companies. The Motley Fool has adisclosure policy.Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.