After several volatile years marked by inflation shocks, rising interest rates and uneven hospital spending, the U.S. medical instrument and medtech sector is entering 2026 on a firmer, yet selective, footing. Procedure volumes have largely normalized post-pandemic, as providers remain cautious on capital budgets and focus more on productivity, reliability and total cost of ownership. For investors, this environment favors companies that can deliver operational improvement and earnings visibility, even if top-line growth is not explosive.

Many medtech stocks continue to trade below historical averages due to lingering macro uncertainty, execution hiccups, or near-term margin pressures. Yet for firms where those pressures are easing, the disconnection between fundamentals and valuation can create opportunity. This article focuses on three U.S.-listed medical instrument names — Fresenius Medical Care (FMS Quick QuoteFMS - Free Report) , Integra LifeSciences (IART Quick QuoteIART - Free Report) and STERIS (STE Quick QuoteSTE - Free Report) — that appear positioned for potential re-rating in 2026, supported by identifiable operational or mix-driven catalysts.

U.S. Macro Trends in 2026

Several U.S.-specific macro forces are shaping the opportunity set for medical instrument stocks.

Medtech equities, particularly those with stable cash flows, remain sensitive to discount-rate assumptions. If the Federal Reserve’s policy path stabilizes within current target range of 3.5-3.75%, valuation multiples for high-quality healthcare names could normalize after a prolonged de-rating.

While labor and materials inflation remain elevated compared with pre-2020 levels, the rate of increase has moderated relative to the peaks seen in 2022-2023 (currently around 2.7%). For device manufacturers, this has less impact on demand and more on margins, as pricing actions and productivity programs start to align with cost structures.

U.S. hospitals continue to balance tight capital budgets with steady procedure volumes. This dynamic favors companies with strong service, consumables, and replacement-driven revenues rather than those dependent solely on large, discretionary equipment purchases.

Persistent staffing shortages are pushing providers toward automation, workflow efficiency, and outsourcing — tailwinds for device makers offering productivity-enhancing technologies or services.

Here’s Why Undervalued Stocks Can Work in This Setup

In this macro environment, undervalued medtech stocks can outperform through a combination of earnings recovery and multiple re-rating. Historically, periods of uncertainty compress valuations below long-term norms. As execution improves or macro risks fade, investors reassess both earnings power and appropriate multiples.

We define “undervalued” as stocks trading below their own historical valuation ranges, as measured using Price to Sales forward 12-months (P/S F12M) multiple, despite intact or improving cash flow generation. When paired with operating leverage, cost-reduction programs, or mix improvement, even modest revenue growth can translate into outsized earnings revisions. The following three companies illustrate this setup in different ways.

3 Medical Instruments Stocks With Upside Potential

Fresenius Medical Care is a global provider of dialysis products and services, with a large U.S. footprint in chronic kidney care.

The company is currently trading at a P/S F12M of 0.55x, below its 5-year median of 0.63x as well as its industry average of 4.18x.

FMS shares have been pressured by concerns around U.S. treatment volumes, reimbursement uncertainty and elevated costs. Yet, recent results show meaningful margin recovery driven by its FME25+ savings program and pricing improvements and favorable mix. The company posted strong organic revenue growth and a rise in operating margin to 11.7% for third-quarter 2025, supported by cost savings and disciplined execution.

Management has highlighted continued cost savings, a broad rollout of high-volume hemodiafiltration (HDF) in the United States, and capital allocation discipline, including share repurchases, as key levers going forward in 2026. Net leverage of 2.6x remains within target, supporting flexibility.

However, slower-than-expected treatment growth, unfavorable reimbursement changes, or sustained labor cost pressure could delay re-rating.

This Zacks Rank #2 (Buy) stock currently has an earnings yield of 11.5% compared with the broader industry’s 0.64%, potentially presenting an opportunity to gain for investors. Fresenius Medical’s five-year expected earnings growth rate is pegged at 12.7%. In 2026, the company is expected to report earnings growth of 9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Integra LifeSciences operates across neurosurgery, wound reconstruction, and surgical instruments, with demand tied to elective and specialty procedures.

The company is currently trading at a P/S F12M of 0.59x, below its 5-year median of 2.14x as well as its industry average of 4.18x.

IART’s multiple reflects execution and supply-chain challenges, including remediation under its Compliance Master Plan. In third-quarter 2025, revenue growth of 5.6% lagged expectations due to supply interruptions, even as adjusted EPS exceeded guidance through cost control.

Management expects supply normalization, margin expansion initiatives targeting $25-$30 million in savings, and relaunches of key products like SurgiMend and PriMatrix to support growth and profitability in 2026.

However, delays in remediation, reimbursement pressure in ENT, or higher leverage could constrain upside.

The company currently has Zacks Rank of 2 and has an earnings yield of 18.5% compared with 0.64% for the broader industry, potentially presenting an opportunity to gain for investors. In 2026, Integra LifeSciences is expected to report earnings growth of 5.5%.

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STERIS provides sterilization services, consumables and equipment, benefiting from recurring demand tied to infection prevention and regulatory requirements.

The company is currently trading at a P/S F12M of 4.23x, below its 5-year high of 5.3x but slightly above its 5-year median of 3.97x as well as the industry average of 4.18x.

While STE may not screen as “cheap” on absolute metrics, its valuation can be viewed as attractive relative to earnings visibility and cash-flow durability. In the second quarter of fiscal 2026, STERIS delivered high-single-digit organic revenue growth and expanded EBIT margin 23.1%, driven by pricing, volume and operating leverage.

A sizable healthcare capital backlog of $400 million, continued growth in higher-margin services, and strong free cash flow generation support incremental margin expansion and capital deployment.

However, tariffs, inflation, or a sharper slowdown in hospital capital spending could temper growth.

This Zacks Rank #2 stock currently an earnings yield of 3.9% compared with 0.64% for the broader industry, potentially presenting an opportunity to gain for investors. In 2026, STERIS is expected to report earnings growth of 8.6%.

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