Integer Holdings Corporation (ITGR) is a medical device outsource manufacturer internationally. It operates in two segments, Medical and Non-Medical. The company offers products for interventional cardiology, structural heart, heart failure, peripheral vascular, and other procedures. In comparison, Conformis, Inc. (CFMS) is a medical technology company that develops, manufactures, and sells joint replacement implants. The company offers personalized knee replacement products, including iTotal CR, a cruciate-retaining product; iTotal PS, a posterior cruciate ligament substituting product; and iDuo, a personalized bicompartmental knee replacement system.
Because the healthcare sector’s focus has been shifting of late to treating several diseases that were deprioritized last year due to the COVID-19 pandemic, the medical devices industry is seeing significant growth this year. Investors’ interest in the medical devices sector is evident in the iShares U.S. Medical Devices ETF’s (IHI) 4.3% gains over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) 3.3% returns.
According to a report by Facts and Factors, the medical device market is expected to grow at a 5% CAGR from 2021 – 2026. Consequently, both ITGR and CFMS should benefit.
CFMS has gained 106.1% year-to-date, while ITGR returned 10.4%. Also, CFMS’ 74.4% gains over the past year are significantly higher than ITGR’s 24.5% returns. And in terms of their past nine months’ performance, CFMS is the clear winner with 79.9% gains versus ITGR’s 34.6%.
But which of these two stocks is a better buy now? Let’s find out.
ITGR announced on January 14, 2021, that its Alden, N.Y., facility recently broke ground on an expansion to accommodate new equipment that will substantially increase the plant’s production capacity of rechargeable Xcellion Lithium-Ion batteries.
On June 23, 2021, CFMS announced the execution of an agreement to enter the Asia-Pacific market through an exclusive distribution relationship with XR Medical Group Limited. The agreement expands the company’s global reach and brings patient-specific knee replacement systems to the largest market in the Asia-Pacific region.
Recent Financial Results
ITGR’s total sales increased 8% sequentially to $290.47 million for its fiscal first quarter ended April 2, 2021. The company’s adjusted EBITDA grew 40.4% sequentially to $61.11 million, while its adjusted net income increased 37.1% sequentially to $32.11 million. Also, its EPS came in at $0.97, up 36.6% sequentially.
CFMS’ total revenue decreased 17.1% sequentially to $13.83 million for its fiscal first quarter, ended March 31, 2021. The company’s loss from operations increased 19.2% sequentially to $9.15 million, while its net loss increased 23% to $11.51 million. Also, its loss per share came in at $0.97, up 12.5% sequentially.
Expected Financial Performance
Analysts expect ITGR’s revenue to increase 11.2% in its fiscal year 2021 and 7.7% in fiscal 2022. The company’s EPS is expected to grow 86% for the quarter ending September 30, 2021, and 37.9% in fiscal 2021. Moreover, its EPS is expected to grow at a 10% per annum rate over the next five years.
In comparison, CFM’s revenue is expected to increase 22.9% in its fiscal 2021 and decrease 6.5% in fiscal 2022. Its EPS is expected to grow 22.2% for the quarter ending September 30, 2021, and 50% in fiscal 2021. CFMS’ EPS is expected to decline at a 14.6% rate per annum over the next five years.
ITGR’s trailing-12-month revenue is 15.73 times CFMS’. ITGR is also more profitable, with an EBITDA margin and net income margin of 16.29% and 6.54%, respectively, compared to CFMS’ negative values.
Furthermore, ITGR’s 5.54%, 2.34%, and 2.72% respective ROE, ROA, and ROTC compare well with CFMS’ negative values.
In terms of trailing-12-month P/S, ITGR is currently trading at 2.85x, which is 58.3% higher than CFMS’ 1.80x. However, CFMS’ 2.84x trailing-12-month P/B is 22.9% higher than ITGR’s 2.31x.
ITGR has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In comparison, CFMS has an overall C rating, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Both ITGR and CFMS have a grade of B for Growth, which is consistent with their impressive revenue and EPS growth. ITGR also has a grade of B for Stability, while CFMS has a D Stability grade.
ITGR has a B grade for Sentiment, which is in sync with favorable analyst sentiment, while CFMS has a C grade for Sentiment, which is consistent with unfavorable analyst sentiment.
ITGR has a B grade for Value, consistent with its 2.47x forward P/S, which is 68.5% lower than the 7.86x industry average. In contrast, CFMS has a C grade for Value, which is in sync with its 2.94x forward P/S, which is 62.6% lower than the 7.86x industry average.
Of the 186 stocks in the Medical – Devices & Equipment industry, ITGR is ranked #35 while CFMS is ranked #110.
Because the demand for advanced medical devices is growing, both ITGR and CFMS should benefit. But ITGR is a better buy because of its higher profitability and superior growth prospects.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical – Devices & Equipment industry here.
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ITGR shares were trading at $92.34 per share on Friday afternoon, up $2.72 (+3.04%). Year-to-date, ITGR has gained 13.73%, versus a 18.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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