Should You Pick F5 Stock Over Teleflex?

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We believe F5 stock (NASDAQ: FFIV), an application security and cloud networking company, and Teleflex stock (NYSE: TFX), best known for its single-use medical products for common diagnostic and therapeutic procedures, will offer similar returns in the next three years. Although these companies are from different sectors, we compare them because they have a similar market capitalization of $9 billion – $10 billion. Also, both companies garnered a little under $3 billion in revenue and operating income of around $0.5 billion in the last twelve months. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits can matter, as larger profits can imply greater market power. Since these stocks are from different sectors, comparing P/S against one another may not be helpful. We compare their current multiples with the historical ones in the sections below to better gauge their valuations.

Interestingly, TFX stock has had a Sharpe Ratio of 0.1 since early 2017, lower than 0.2 for FFIV and 0.5 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

Looking at stock returns, FFIV is up 12% this year, faring better than TFX, down 21%, and aligning with the broader S&P500 index, up 12%. There is more to the comparison, and in the sections below, we discuss the possible returns for F5 and Teleflex in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation, in an interactive dashboard analysis of F5 vs. TeleflexWhich Stock Is A Better Bet? Parts of the analysis are summarized below.

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1. F5’s Revenue Growth Is Better 

  • F5’s revenue growth has been better, with a 6.4% average annual growth rate in the last three years, compared to 2.6% for Teleflex.
  • FFIV revenues rose from $2.2 billion in 2019 to $2.7 billion in 2022, led by services and product revenue growth due to increasing demand and entry into new markets.
  • For Teleflex, revenue grew to $2.8 billion in 2022 vs. $2.6 billion in 2019 amid price increases and higher demand for interventional products, original equipment, and developmental services. The Z-Medica and Standard Bariatrics acquisitions have bolstered the overall top-line growth.
  • If we look at the last twelve-month period revenues, F5 fares better with sales growth of 4.8% vs. 3.2% for Teleflex.
  • Our F5 Revenue Comparison and Teleflex Revenue Comparison dashboards provide more insight into the companies’ sales.
  • Looking forward, Teleflex is likely to see better sales growth than F5. We forecast F5’s top-line to expand at a CAGR of 3.4% to $3.1 billion in three years, while Teleflex will likely see its sales rise in a mid-single-digit average annual growth rate to $3.3 billion over this period, based on Trefis Machine Learning analysis.

2. Teleflex Is More Profitable

  • F5’s operating margin declined from 23% in 2019 to 15% in 2022,  while Teleflex’s operating margin expanded from 16% to 18% over this period.
  • Looking at the last twelve-month period, Teleflex’s operating margin of 18% fares slightly better than 17% for F5.
  • F5’s margin metric has been weighed down due to a rise in component costs.
  • Our F5 Operating Income Comparison and Teleflex Operating Income Comparison dashboards have more details.
  • Looking at financial risk, F5 fares better. F5 is a debt-free company, while Teleflex’s debt as a percentage of equity is around 17%. Also, F5’s 13cash as a percentage of assets is higher than 4% for the latter, implying that F5 has a better financial position.

3. The Net of It All

  • We see that F5 has seen better revenue growth and financial position. On the other hand, Teleflex is more profitable.
  • Now, looking at prospects, using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe F5 and Teleflex will offer similar returns in the next three years.
  • That said, if we compare the current valuation multiples to the historical averages, TFX fares better. F5 stock is trading at 3.4x revenues compared to its last five-year average of 4.3x. In comparison, Teleflex’s stock trades at 3.2x revenues vs. the last five-year average of 6.1x.
  • Our F5 (FFIV) Valuation Ratios Comparison and Teleflex (TFX) Valuation Ratios Comparison have more details.
  • The table below summarizes our revenue and return expectations for both companies over the next three years and points to an expected return of 13% for FFIV over this period vs. a 14% expected return for TFX, based on Trefis Machine Learning analysis – F5 vs. Teleflex – which also provides more details on how we arrive at these numbers.

While FFIV and TFX may offer similar returns in the next three years, it is helpful to see how F5’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Sep 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 FFIV Return -1% 12% 11%
 TFX Return -7% -21% 23%
 S&P 500 Return -5% 12% 92%
 Trefis Reinforced Value Portfolio -6% 24% 537%

[1] Month-to-date and year-to-date as of 9/29/2023
[2] Cumulative total returns since the end of 2016

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