Double-Digit EPS Growth with Nearly 80% of Revenue from Consumables/Service
- Nearly 80% of revenue is now generated from consumables and service.
- EPS are estimated up 11% in FY17 (March) to a record $3.75 and 13% in FY18 to $4.22, with the shares trading at 16.9x our 12-month forward EPS estimate, or 130% of our projected 3-to-5 year EPS growth rate of 13%.
- Operating margins should improve to 19.7% in FY18 (from an estimated 18.2% in FY17 and 16.9% in FY16), aided by integration benefits from the $2.3 billion acquisition of Synergy Health in November 2015, solid hospital spending, divesting low margin businesses and cost savings.
- STERIS has a significant opportunity in applying Synergy’s outsourcing model in the U.S., as well as using Synergy’s footprint in Europe to expand service/consumable offerings and eventually capital equipment sales.
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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