Should You Buy Teleflex Stock At $225?

TFX: Teleflex logo
TFX
Teleflex

Teleflex stock (NYSE: TFX), best known for its single-use medical devices for common diagnostic and therapeutic procedures, has seen a 31% fall this year, underperforming the broader S&P500 index, down 16%. Even if look at the longer term, TFX stock, with a -13% return since late 2018, has underperformed the S&P 500 index, up over 60%.

This 13% fall for TFX stock since late 2018 can primarily be attributed to 1. the company’s P/S ratio falling 23% to 3.8x trailing revenues, from 4.9x in 2018, 2. a 1% rise in its total shares outstanding to 47 million, partly offset by 3. Teleflex’s revenue growth of 14% to $2.8 billion over the last twelve months, compared to $2.4 billion in 2018. Higher revenues and shares outstanding have meant that its revenue per share rose 12% to $59.52 now, compared to $53.26 in 2018. Our dashboard on Why Telelflex Stock Moved has more details.

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Teleflex’s revenue growth over the recent quarters has been driven by higher demand for interventional products and original equipment & developmental services. The acquisition of Z-Medica – a hemostatic products maker – in late 2020 has also bolstered the top-line growth. Teleflex, in Q3 2022, acquired Standard Bariatrics for its stapling technology used in bariatric surgery. This acquisition is expected to add over $30 million to the company’s top-line. Not only has the company seen its sales grow, but it has also improved the operating margin to 24.2% now, compared to 17.3% in 2018.

However, TFX stock has been weighed down over the last year or so due to its recall of Arrow-Trerotola Over-The-Wire Percutaneous Thrombolytic Device (PTD) 7FR – used for dialysis interventions – in Q4 2021, after reports indicating one of the parts can detach causing local ischemia. The U.S. FDA has classified the Arrow-Trerotola recall as a class 1 recall, implying that the use of the product will cause serious health consequences. Earlier this month, Teleflex announced a recall of over 2.7 million Iso-Gard Filter S filters in the U.S. after receiving reports that the bacterial filters may split or detach from breathing systems. [1]

Teleflex announced mixed Q3 results in late October, with sales missing and earnings falling above the street estimates, as sales growth for its new products and better pricing was more than offset by lower volume and foreign exchange headwinds.

After its fall this year, we believe TFX has some room for improvement. At its current levels of around $225, it is trading at 3.8x its forward expected revenue of about $59.03 per share, compared to its last four-year average of 6.1x, implying that the stock has some room for growth.

While TFX stock looks like it has some room for growth, it is helpful to see how Telelfex’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis and recent market volatility have created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Novanta vs. Abbott.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TFX Return 5% -31% 40%
 S&P 500 Return 4% -16% 80%
 Trefis Multi-Strategy Portfolio 4% -19% 221%

[1] Month-to-date and year-to-date as of 11/24/2022
[2] Cumulative total returns since the end of 2016

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Notes:
  1. Teleflex Press Release, Nov 3, 2022 []