Stericycle stock analysis

Stericycle stock analysis – will the stock rebound back to above $140?

Stericycle stock analysis  is part of a full Waste Management stocks sector investing analysis alongside a list of 15 waste management stocks, all analyzed.

Stericycle stock analysis

Sterycycle is a perfect example of what happens to a stock when the growth expectations aren’t met. Something that hasn’t happened to Steris Stock that we analysed too, but it shows the risk and reward of investing in such growth stocks. Thus, a very concerning risk for many other exuberantly priced waste management stocks.

Stericycle stock analysis - sterycycle stock price
Stericycle stock analysis – sterycycle stock price

Stericycle business

Stericycle is a compliance company that specializes in collecting and disposing regulated substances, such as medical waste and sharps, pharmaceuticals, hazardous waste, and providing services for recalled and expired goods. It also provides related education and training services, and patient communication services.

Stericycle business analysis
Stericycle business analysis

Everything was going very well both for the company and the stock up to 2015. From amazing revenue growth, revenue started declining, net income turned into big losses and free cash flows fell to zero.

Stericycle stock financials
Stericycle stock financials

Combine the decline in fundamentals to a price to earnings ratio above 30 in 2015 and it is logical for the stock price to fall more than 50%.

Stericycle stock price decline
Stericycle stock price decline

The thing is that too much debt is never good. Having $ 2.8 billion in debt on revenues of less than $4 billion is a difficult thing to manage. They made some bad acquisitions and the growth story came to a halt.

Can Stericycle stock rebound?

Of course it can, but what I usually do is compare the current stock price with the earnings capacity the stock had and then see whether it is something I should dig deeper into. Stericycle’s best EPS was in 2014 with $3.79 while cash flows often surpassed $4.

If I wish for a 15% investing return, I would need the stock to be to be around $26 on the $4 per share in free cash flow. The 52week low was $34 that shows how you can find investments that should give you double digit returns over the long-term, you just have to be patient. However, Stericycle is in full turnaround mode and that is always an uncertain thing. Given the stock is at $60, not at $26, nor even at $35 anymore, I will not spend too much time as whether it can go to $100 or not is not of an interest to me. Hoping the stock can get valued in a similar way to other waste management stocks with PE ratios above 30, that in case of a good turnaround could push the stock above $120 is not what value investors do. We invest in absolute returns, business returns, not stock market returns, relative returns.

Sven Carlin Ph.D., the author, is an independent stock market researcher and investor managing the Sven Carlin Stock Market Research Platform.

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