"What I wonder about (amongst other things) is the degree to which non-analgam sales are acting as substitutes for amalgam, and thus whether current growth rates of non-amalgam are representative of sustainable growth rates as analgam keeps tapering off."@MarsCIt is a question that I have asked myself in the past and for which it is difficult to find any definitive answers.
However, what I did do some months back was to attempt to eliminate the "amalgam effect" by looking at growth rates in revenues - in constant currency terms - over certain time frames and across SDI's segmental geographies, i.e., the USA, Europe and ex-Australia (I ignored Brazil because its revenue contribution is a small proportion of total revenue and is predominantly amalgam-derived, anyway).
What I tried to do in this exercise was isolate the underlying organic growth rates of non-amalgam revenues.
To this end, there are two discrete bits of data which I found to be instructive:
1. Revenues generated from Europe (negligible amalgam revenue). This is quite relevant as an indicator because Europe is overwhelmingly a non-amalgam market, so what has happened to SDI's revenues in Europe has been largely organic growth in non-amalgam sales, both via system growth and growth in SDI's market share, with very little substitution for amalgam.
2. Revenues from USA and Australia (historically high proportions of amalgam sales). This is a bit of a more tricky one. The problem with this data set is that - post 2013, roughly, which is when the structural decline in amalgam sales commenced - it is impossible to say to what extent the growth in non-amalgam sales has been substituting for the shrinking amalgam market. However, looking at the revenue trends in these geographies
before the 2013 watershed does possibly provide some insights into the pure organic growth (as opposed to "substitutional" growth) of SDI's non-amalgam products.
The chart below provides the pretty pictures for these two revenue streams going as far back I have collated the data (note: I've separately included the individual revenue series for the USA and Australia - the two thin grey lines, while the red line is the summation of the two):
View attachment 1588171So what I was really looking for here is what happened to revenue during periods when amalgam sales were either:
1. absent (i.e., Europe), or
2 relatively stable (i.e., pre-2013 for USA and Australia)
For Europe, the CAGR in Revenue has been around
6.7%pa over the 14-year review period. That is consistent with - higher, in fact, than the 6% CAGR figure - I derived for non-amalgam sales for the overall company, as discussed in my previous post.
And in terms of USA and Australia (between 2004 and 2013, i.e., prior to amalgam sales declining), the CAGR was remarkably similar, viz.
6.6%pa.For posterity purposes, table of the source data:
View attachment 1588339While the few points above are clearly not the definitive study on this question, the exercise does suggest that the growth in revenue from SDI's non-amalgam products is independent of what has been happening to amalgam sales.
Of the things with which I concern myself when it comes to owning shares in SDI, the company approaching ex-growth status is not one of them.
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(20min delay)