Potential Opportunity from the Recent 20% Decline; Shred-it to Aid EPS
- The transformative acquisition of Shred-it in October 2015 for $2.3 billion should be accretive by at least 10% in 2016 (over 40 cents per share) and in the mid-to-high teens in 2018, and expands Stericycle’s addressable market by nearly 70% to $33 billion.
- Stericycle is the only national provider of regulated medical waste services, with around 15x the market share of its nearest competitor, and has the potential to more than triple the value of its accounts through its multiple service offerings, utilized by only 20%-to-30% of its customers.
- Free cash flow estimated at $499 million in 2016 allows for debt reduction (debt-to-EBITDA should be reduced to 2.0x-to-2.5x by 2017 from 3.5x currently), additional acquisitions, and/or share repurchases with the stock off 20% from its all-time high of $152 in October (vs a 1% increase for the S&P 500 Index).
Stericycle is engaged in the medical and hazardous waste management and secure information services. The company's segments are: North America, and International Regulated Waste and Compliance Services, which provides medical waste management services, pharmaceutical waste services, compliance programs, retail and healthcare, industrial and manufacturing hazardous waste management and secure information destruction; and Domestic Communication and Related Services, which provides appointment reminders, secure messaging, event registration, and other communications mainly for hospitals and integrated delivery network's as well as regulated recall and returns management communication, and logistics.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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