Teleflex trades at $132.09 per share and has stayed right on track with the overall market, gaining 9.6% over the last six months. At the same time, the S&P 500 has returned 10%.
Is now the time to buy Teleflex, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Teleflex Will Underperform?
We’re cautious about Teleflex. Here are three reasons why TFX doesn’t excite us, plus one stock we’d rather own.
1. Revenue Spiraling Downwards
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Teleflex struggled to consistently generate demand over the last five years as its sales dropped at a 3.6% annual rate. This was below our standards and is a sign of poor business quality.
2. Weak Constant Currency Growth Points to Soft Demand
In addition to reported revenue, constant currency revenue is a useful data point for analyzing Surgical Equipment & Consumables - Specialty companies. This metric excludes currency movements, which are outside of Teleflex’s control and are not indicative of underlying demand.
Over the last two years, Teleflex’s constant currency revenue averaged 3.8% year-on-year growth. This performance slightly lagged the sector and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
3. Free Cash Flow Margin Dropping
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Teleflex’s margin dropped by 19.8 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Teleflex’s free cash flow margin for the trailing 12 months was breakeven.
Final Judgment
We cheer for all companies helping people live better, but in the case of Teleflex, we’ll be cheering from the sidelines. That said, the stock currently trades at 17× forward P/E (or $132.09 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. We’d suggest looking at one of our top digital advertising picks.
Stocks We Would Buy Instead of Teleflex
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