Integra Lifesciences Holdings (IART): A Hidden Gem or a Mirage? Unearthing Its True Market Value
Integra Lifesciences Holdings Corp (NASDAQ:IART), a New Jersey-based medical equipment company, has recently experienced a daily loss of -7.1 % and a 3-month loss of -6.69%. Despite these losses, the company has reported an Earnings Per Share (EPS) of 1.57. Is the stock significantly undervalued? This article aims to answer this question and provide an in-depth valuation analysis of Integra Lifesciences Holdings (NASDAQ:IART).
A Glimpse at Integra Lifesciences Holdings
Integra Lifesciences Holdings Corp focuses on developing products for regenerative therapy, extremity orthopedics, and neurosurgical applications. The firm operates two primary segments: Codman specialty surgical and tissue technologies. While the company serves Europe, Asia Pacific, and the rest of the world, it derives key revenue from domestic sales. With a current stock price of $38.46 per share and a market cap of $3.10 billion, it's crucial to compare this with the company's GF Value, an estimation of fair value, to determine if the stock is over or undervalued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides 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. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Is Integra Lifesciences Holdings Undervalued?
According to the GuruFocus Value calculation, Integra Lifesciences Holdings (NASDAQ:IART) stock appears to be significantly undervalued. The GF Value is an estimate of the fair trading value of the stock, calculated based on historical multiples, past business growth, and future business performance estimates. As the stock's current price of $38.46 per share is significantly below the GF Value Line, its future return is likely to be higher. Consequently, the long-term return of Integra Lifesciences Holdings' stock is likely to be much higher than its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Assessing Financial Strength
Before investing in a company, it's crucial to check its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage can provide insight into the company's financial strength. Integra Lifesciences Holdings has a cash-to-debt ratio of 0.19, which is worse than 86.83% of 835 companies in the Medical Devices & Instruments industry. The overall financial strength of Integra Lifesciences Holdings is 5 out of 10, indicating that the company's financial strength is fair.
Evaluating Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Integra Lifesciences Holdings has been profitable 8 years over the past 10 years. During the past 12 months, the company had revenues of $1.50 billion and Earnings Per Share (EPS) of $1.57. Its operating margin of 11.76% is better than 68.28% of 826 companies in the Medical Devices & Instruments industry. Overall, GuruFocus ranks Integra Lifesciences Holdings' profitability as fair.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Integra Lifesciences Holdings is 2.1%, which ranks worse than 65.06% of 724 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is 20.9%, which ranks better than 67.63% of 729 companies in the Medical Devices & Instruments industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Integra Lifesciences Holdings's ROIC is 4.75 while its WACC came in at 8.51.
Conclusion
In conclusion, the stock of Integra Lifesciences Holdings (NASDAQ:IART) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 67.63% of 729 companies in the Medical Devices & Instruments industry. To learn more about Integra Lifesciences Holdings stock, you can check out its 30-Year Financials here.
To find out the high quality companies that may deliver above average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
