NEW YORK (TheStreet) -- Dentsply International  (XRAY - Get Report) stock is declining by 4.99% to $51.64 in pre-market trading on Wednesday, after the company agreed to acquire fellow dental equipment manufacturer Sirona Dental Systems  (SIRO) in a $5.56 billion deal, according to Reuters.

Sirona stock is down 4.17% to $95.17 in pre-market trading.

Sirona shareholders will receive 1.8142 shares of Dentsply to create a company that will have about $3.8 billion in annual revenue.

The board of directors has approved the deal, which still requires shareholder and regulatory approval, but is expected to close in the first quarter of 2016.

Once completed, Sirona CEO Jeffrey Slovin will serve as chief executive of Dentsply Sirona, while Dentsply CEO Bret Wise will become executive chairman.

"Combining Sirona's proven digital solutions and equipment with Dentsply's leading consumables platform creates the most comprehensive dental solutions offering available to meet customer demand in every key segment," Slovin said in a statement.

Separately, TheStreet Ratings team rates DENTSPLY INTERNATL INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate DENTSPLY INTERNATL INC (XRAY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for DENTSPLY INTERNATL INC is rather high; currently it is at 61.61%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.31% trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • DENTSPLY INTERNATL INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DENTSPLY INTERNATL INC increased its bottom line by earning $2.23 versus $2.15 in the prior year. This year, the market expects an improvement in earnings ($2.59 versus $2.23).
  • The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
  • You can view the full analysis from the report here: XRAY Ratings Report