DamageEffect.cs

using System.Collections;
using System.Collections.Generic;
using UnityEngine;

/// <summary>
/// Attach the script to a component with a spriterenderer. 
/// Set the desired color for the damage state with SetDamageColor(Color color)
/// Call EnableDamageEffect(float duration) to activate the damage effect for a desired duration
/// Call DisableDamageEffect() to disable the effect immediately
/// </summary>
[RequireComponent(typeof(SpriteRenderer))]
public class DamageEffect : MonoBehaviour
{
    public Color damageColor;
    /// <summary>
    /// How long does it take to switch from default color to the damage color
    /// </summary>
    public float flickeringDuration;
    /// <summary>
    /// If smooth transition is disabled, the color will switch immediately from damage to regular without lerping inbetween
    /// </summary>
    public bool enableSmoothTransition;

    private Color defaultColor;
    private Color currentColor;
    private new SpriteRenderer renderer;
    private bool isDamageEffectActive;
    private float effectTimeFull;
    private float currentEffectTime;

    public void SetDamageColor(Color color)
    {
        this.damageColor = color;
    }

    public void SetSpriteRenderer(SpriteRenderer renderer)
    {
        this.renderer = renderer;
        defaultColor = renderer.color;
        currentColor = renderer.color;
    }

    public void SetDefaultColor(Color color)
    {
        defaultColor = color;
    }

    void Awake()
    {
        isDamageEffectActive = false;
        effectTimeFull = 0f;
        currentEffectTime = 0f;
        var renderComponent = GetComponent<SpriteRenderer>();
        SetSpriteRenderer(renderComponent);
    }

    public void EnableDamageEffect(float duration)
    {
        isDamageEffectActive = true;
        effectTimeFull = duration;
        currentEffectTime = 0f;
    }

    public void DisableDamageEffect()
    {
        isDamageEffectActive = false;
        effectTimeFull = 0f;
        currentEffectTime = 0f;
        ResetVisualDamage();
    }

    private void ResetVisualDamage()
    {
        renderer.color = defaultColor;
    }

    // Update is called once per frame
    void Update()
    {
        if (isDamageEffectActive)
        {
            currentEffectTime += Time.deltaTime;

            if (enableSmoothTransition)
            {
                float durationRemainder = Mathf.PingPong(currentEffectTime, flickeringDuration);
                float lerpVal = durationRemainder / flickeringDuration;
                renderer.color = Color.Lerp(defaultColor, damageColor, lerpVal);
            }
            else
            {
                int divisonResult = (int)(currentEffectTime / flickeringDuration);
                if (divisonResult % 2 == 0)
                {
                    renderer.color = defaultColor;
                }
                else
                {
                    renderer.color = damageColor;
                }
            }

            if (currentEffectTime >= effectTimeFull)
            {
                DisableDamageEffect();
            }
        }
    }
}

I would consider doing the damage effect as a co-routine that way you don't need to eat the cost of this being in the update loop when the damage effect isn't happening.