Teleflex Inc (TFX, Financial) has seen a daily gain of 8.09%, but a 3-month loss of 19.45%. With an Earnings Per Share (EPS) of 7.79, the question arises: Is the stock significantly undervalued? This article provides a comprehensive valuation analysis of Teleflex (TFX), encouraging readers to delve into the financial metrics and market performance of the company.
Company Introduction
Based in Wayne, Pennsylvania, Teleflex is a renowned manufacturer of hospital supplies and medical devices, primarily catering to the vascular and surgical areas. The company's business operations span across seven segments, with the U.S. accounting for 60% of its revenue. The current stock price of Teleflex stands at $202.68 per share, with a market cap of $9.50 billion. However, the GF Value, an estimation of fair value, is $343.21, suggesting that the stock may be significantly undervalued.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock, derived from a unique method incorporating historical trading multiples, an internal adjustment factor based on past company returns and growth, and future business performance estimates. The GF Value Line gives an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Teleflex's stock appears to be significantly undervalued based on GuruFocus' valuation method. Because Teleflex is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. Teleflex has a cash-to-debt ratio of 0.15, which is worse than 89.44% of 833 companies in the Medical Devices & Instruments industry. The overall financial strength of Teleflex is 6 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. Teleflex, with high profit margins, has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $2.90 billion and Earnings Per Share (EPS) of $7.79. Its operating margin is 18.45%, ranking better than 82.39% of 829 companies in the Medical Devices & Instruments industry. Overall, GuruFocus ranks the profitability of Teleflex at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Teleflex is 2.3%, ranking worse than 65.1% of 725 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is 4.7%, ranking worse than 56.75% of 726 companies in the Medical Devices & Instruments industry.
ROIC vs WACC
Evaluating a company's profitability can also be done by comparing its return on invested capital (ROIC) to its weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Teleflex's ROIC was 7.11, while its WACC came in at 9.95.
Conclusion
In summary, the stock of Teleflex appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 56.75% of 726 companies in the Medical Devices & Instruments industry. To learn more about Teleflex stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
