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TFX or STE: Which is a Better Investment Pick Right Now?


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Medical Instrument companies Teleflex Incorporated TFX and STERIS plc STE are two solid contenders in the U.S. surgical instruments space, which is expected to reach a worth of $11.28 billion by the end of 2019, per Transparency Market Research.

OH-based STERIS, in process of providing infection prevention, and other procedural products and services, largely specializes in the manufacture of surgical and sterile processing equipment.

A huge portion of PA-based Teleflex's portfolio comprises a range of minimally invasive surgical products, including MiniLap Percutaneous Surgical System, Weck Hem-o-lok Polymer Locking Ligation System, and Weck EFx Shield Fascial Closure System.

Notably both companies carry a Zacks Rank #2 (Buy). You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Here, we make a detailed analysis of the companies' fundamentals to determine which has a slight edge over the other.

Price Performance

In the past year, Teleflex's shares have gained 20.8% compared with STERIS' rally of 36.3%. The Medical Instruments industry has gained 2.5% during the same time frame.

This demonstrates STERIS to be the more favorable stock.

Which Way Are Estimates Headed?

Earnings

The Zacks Consensus Estimate for Teleflex's current-year earnings stands at $11.05, implying an improvement of 11.6% from the figure reported in the previous year. The same for STERIS is projected at $5.37, indicating rise of 9.8% from the prior-year reported figure.

Sales

The Zacks Consensus Estimate for Teleflex's current-year revenues is pegged at $2.59 billion, suggesting growth of 5.6% from the figure reported in the previous year. The same for STERIS is pegged at $2.94 billion, calling for rise of 5.6% from the prior-year reported figure.       

Clearly, Teleflex has a competitive advantage over STERIS, with respect to current-year earnings estimates.

How Does Valuation Look?

Teleflex stock currently looks overvalued when compared with STERIS. Teleflex currently trades at a price-to-sales ratio (TTM basis) of 6.37 compared with STERIS's 4.61. Meanwhile, the industry's ratio stands at 3.43.

Hence, STERIS wins this round.

Recent Financial Results

Teleflex

For the first quarter of 2019, Teleflex reported earnings per share (EPS) from continuing operations of $2.24, up 4.2% year over year. The bottom line also surpassed the Zacks Consensus Estimate by 3.7%.

Net revenues from continuing operations in the first quarter rose 4.5% year over year to $613.6 million. On a year-over-year basis, the company saw organic constant-currency revenue growth of 7.6%. The top line surpassed the Zacks Consensus Estimate by 0.9%

STERIS

STERIS reported fourth-quarter fiscal 2019 adjusted earnings per share (EPS) of $1.53, up 23.4% year over year. The metric surpassed the Zacks Consensus Estimate by 6.3%.

Revenues of $768.2 million in the quarter rose 7.3% year over year and surpassed the Zacks Consensus Estimate by 4.6%.

Factors Driving Growth

Teleflex

NeoTract, the acquired business of Teleflex, has already begun contributing to the its top line significantly. In the las t report ed quarter, NeoTract continued building strong momentum and as a result, Interventional Urology business registered 45% year-over-year growth.The synergies from the acquisition of Vascular Solutions have been contributing to Teleflex's top line since the last reported quarter. In the first quarter, revenues from Vascular Solutions registered 2.5% rise from the prior-year period, owing to strength in PICC (Peripherally Inserted Central Catheters) and visual navigation products.

The company has reaffirmed its revenue and EPS guidance for 2019.

STERIS

The acquisition of U.K.-based outsourced sterilization services provider Synergy Healthhas boosted STERIS' presence in the international markets by combining the strong presence of the latter in North America with Synergy's solid footprint across Europe. Synergy has also provided the company an opportunity to better serve the emerging markets of the Asia Pacific and Latin America.

High potential in healthcare and pharmaceutical industries, driven by the aging of the global population and an increasing number of individuals entering their prime healthcare consumption years, has also been expanding the company's foothold in the market lately.

Management anticipates constant-currency organic revenue growth of 5-6%, with currency impact approximately neutral to its revenue guidance.

To Wrap it Up

Our comparative analysis indicates that STERIS is better-positioned than Teleflex, considering price performance and valuation. However, Teleflex has an edge on the basis of current-year earnings estimates.

In terms of both companies' growth prospects, investors are hopeful about STERIS' acquisition of Synergy Health and Teleflex being benefited from the Vascular Solutions acquisition.

Other Key Picks

A couple of other top-ranked stocks in the broader medical space are NuVasive NUVA and Penumbra PEN . While Penumbra  currently sports a Zacks Rank #1, NuVasive carries a Zacks Rank #2.

NuVasive's long-term earnings growth rate is expected to be 11.9%.

Penumbra's long-term earnings growth rate is projected at 21.5%.

The Hottest Tech Mega-Trend of All

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Teleflex Incorporated (TFX): Free Stock Analysis Report

Penumbra, Inc. (PEN): Free Stock Analysis Report

NuVasive, Inc. (NUVA): Free Stock Analysis Report

STERIS plc (STE): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Business , Stocks
Referenced Symbols: TFX , PEN , NUVA , STE



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