Envista (NVST)

Dental products company Envista Holdings (NYSE:NVST) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 11.5% year on year to $669.9 million. Its non-GAAP profit of $0.32 per share was 16% above analysts’ consensus estimates.

Company Overview

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.

The dental equipment and technology industry encompasses companies that manufacture orthodontic products, dental implants, imaging systems, and digital tools for dental professionals. These companies benefit from recurring revenue streams tied to consumables, ongoing maintenance, and growing demand for aesthetic and restorative dentistry. However, high R&D costs, significant capital investment requirements, and reliance on discretionary spending make them vulnerable to economic cycles. Over the next few years, tailwinds for the sector include innovation in digital workflows, such as 3D printing and AI-driven diagnostics, which enhance the efficiency and precision of dental care. However, headwinds include economic uncertainty, which could reduce patient spending on elective procedures, regulatory challenges, and potential pricing pressures from consolidated dental service organizations (DSOs).

Envista's competitors include Dentsply Sirona (NASDAQ:XRAY), Align Technology (NASDAQ:ALGN), Straumann Group (SWX:STMN), and Henry Schein (NASDAQ:HSIC), as well as privately-held companies like Planmeca and Carestream Dental.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $2.62 billion in revenue over the past 12 months, Envista has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Envista grew its sales at a mediocre 5.2% compounded annual growth rate. This was below our standard for the healthcare sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Envista’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Envista reported year-on-year revenue growth of 11.5%, and its $669.9 million of revenue exceeded Wall Street’s estimates by 4.6%.

Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.

Although Envista was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 1.3% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, Envista’s operating margin decreased by 6.3 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 5.3 percentage points. This performance was poor no matter how you look at it - it shows its expenses were rising and it couldn’t pass those costs onto its customers.

In Q3, Envista generated an operating margin profit margin of 8.6%, up 5.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Envista’s unimpressive 4.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q3, Envista reported adjusted EPS of $0.32, up from $0.12 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Envista’s full-year EPS of $1.06 to grow 12.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Envista has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.1% over the last five years, better than the broader healthcare sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that Envista’s margin dropped by 4.5 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Envista’s free cash flow clocked in at $67.9 million in Q3, equivalent to a 10.1% margin. This cash profitability was in line with the comparable period last year and its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Envista’s five-year average ROIC was negative 3.6%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

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.

Envista reported $1.13 billion of cash and $1.6 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $351.4 million of EBITDA over the last 12 months, we view Envista’s 1.3× net-debt-to-EBITDA ratio as safe. We also see its $36.2 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Envista beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some positives. The stock traded up 1.1% to $20.19 immediately after reporting.

Updated: December 3, 2025 at 10:42 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Envista.

Envista falls short of our quality standards. For starters, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its operating margins are in line with the overall healthcare sector, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Envista’s P/E ratio based on the next 12 months is 16.5x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $22 on the company (compared to the current share price of $20.44).