STE: Recurring Revenue at Nearly 80% of the Total and Improving Margins
- Nearly 80% of revenue is now recurring, generated from consumables and service.
- Operating margins should improve to 19.8% in FY18 (from 18.2% in FY17 and 16.9% in FY16), aided by approximately $10 million in remaining cost synergies from the $2.3 billion acquisition of Synergy Health in November 2015, divesting low margin businesses and productivity improvements.
- 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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