Aging Population Could Help Steris (STE) Shares Clean Up - Barron's
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Steris Corp. (NYSE: STE) shares are trading higher this morning, as Barron's says that the company may have just the solution needed for doctors on how to contain hospital-borne infections.
However, being the market leader in sterilization equipment doesn't necessarily mean that you will be able to just plop your wares on the market without navigating through some regulatory hurdles. Delays have hobbled earnings over the past year, costing the company plenty on the on the top and bottom lines.
Notably, many analysts agree that Steris is beginning to conquer regulatory issues, and should return to growth next year.
In November, Avondale Partners increased their price target on the shares from $38 to $42. Coincidentally, Steris also increased their outlook on the same day, boosting their EPS outlook for FY10 from $2.00 - $2.30 to $2.15 to $2.30.
Steris is also doling out a $0.15 quarterly dividend, which yields 1.8% annually at current price levels.
Of their $1.2 billion in annual revs, 72% is generated from doctors and hospitals.
Of course, and aging population has put U.S. hospitals under pressure to prevent infections while under care.
A recent development that is adding pressure to the company is their System 1 processor, which the company made modifications to without prior U.S. FDA consent. Consequently, the FDA requested that hospitals replace the device. With 20,000 outstanding, the costs are mounting quickly.
However, the company already has a replacement, FDA approved, which has received 1,000 in initial orders and indications for 7,000 quotes.
The move could prove positive as hospital budgets are bouncing back as Steris continues to cut costs and launch new products. Growth over the next several years is expected to be 12% annually.
With $217 million in cash and $210 million in debt on the balance sheet, shares could jump if they report anywhere close to the $2.21 per share that they had in FY09.
At a P/E of 14.8x, the stock is still cheap to its historical P/E of 18.3x. An analyst at Soleil thinks that the stock could get to $42 over the next 12-months based on a 16.5x multiple and $2.55 in EPS expected in FY11.
Ironically, in Barron's Stock Grader, they rate Steris at a Sell. The four major categories are graded as follows: Growth is a 'C,' Value is a 'B+,' Profitability is a B-,' and Cash Flow is a 'B+.' Notable sub-categories include: An 'A+' in Debt/Cash Flow Ratio, an 'A' in Price/Book Ratio, and an 'A' in relative margins. On the opposite end, Barron's gives Steris' Growth Potential an 'F,' their Capital Utilization an 'F,' and their P/E Analysis and 'F.'
The stock is up 0.6% in morning trading.
However, being the market leader in sterilization equipment doesn't necessarily mean that you will be able to just plop your wares on the market without navigating through some regulatory hurdles. Delays have hobbled earnings over the past year, costing the company plenty on the on the top and bottom lines.
Notably, many analysts agree that Steris is beginning to conquer regulatory issues, and should return to growth next year.
In November, Avondale Partners increased their price target on the shares from $38 to $42. Coincidentally, Steris also increased their outlook on the same day, boosting their EPS outlook for FY10 from $2.00 - $2.30 to $2.15 to $2.30.
Steris is also doling out a $0.15 quarterly dividend, which yields 1.8% annually at current price levels.
Of their $1.2 billion in annual revs, 72% is generated from doctors and hospitals.
Of course, and aging population has put U.S. hospitals under pressure to prevent infections while under care.
A recent development that is adding pressure to the company is their System 1 processor, which the company made modifications to without prior U.S. FDA consent. Consequently, the FDA requested that hospitals replace the device. With 20,000 outstanding, the costs are mounting quickly.
However, the company already has a replacement, FDA approved, which has received 1,000 in initial orders and indications for 7,000 quotes.
The move could prove positive as hospital budgets are bouncing back as Steris continues to cut costs and launch new products. Growth over the next several years is expected to be 12% annually.
With $217 million in cash and $210 million in debt on the balance sheet, shares could jump if they report anywhere close to the $2.21 per share that they had in FY09.
At a P/E of 14.8x, the stock is still cheap to its historical P/E of 18.3x. An analyst at Soleil thinks that the stock could get to $42 over the next 12-months based on a 16.5x multiple and $2.55 in EPS expected in FY11.
Ironically, in Barron's Stock Grader, they rate Steris at a Sell. The four major categories are graded as follows: Growth is a 'C,' Value is a 'B+,' Profitability is a B-,' and Cash Flow is a 'B+.' Notable sub-categories include: An 'A+' in Debt/Cash Flow Ratio, an 'A' in Price/Book Ratio, and an 'A' in relative margins. On the opposite end, Barron's gives Steris' Growth Potential an 'F,' their Capital Utilization an 'F,' and their P/E Analysis and 'F.'
The stock is up 0.6% in morning trading.
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