Shareholders of Integer Holdings would probably like to forget the past six months even happened. The stock dropped 23.6% and now trades at $83.39. This might have investors contemplating their next move.
Is now the time to buy Integer Holdings, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Integer Holdings Not Exciting?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons we avoid ITGR and a stock we'd rather own.
1. Fewer Distribution Channels Limit its Ceiling
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With just $1.85 billion in revenue over the past 12 months, Integer Holdings is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Integer Holdings’s revenue to stall, a deceleration versus its 11.5% annualized growth for the past five years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Integer Holdings historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.6%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.
Final Judgment
Integer Holdings isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 13.8× forward P/E (or $83.39 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our top digital advertising picks.
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