Stericycle (SRCL) is a leader in a very specific industry niche: medical waste collection and services. Recently, the company has been accused by veterinary hospitals of overcharging for its services, causing the stock to take a dip. But there are few alternatives to Stericycles services, making this dip an interesting buy in opportunity.
The company's extensive network makes it hard to compete with. This is reflected in an outstanding operating margin at 24.51% and 5-year annual sales per share growth at 16.21%. 5-year EPS growth is even higher at 18.53%. Despite aggressive acquisitions, debt to EBITDA has been maintained at 2.24x. Analysts continue to hold the stock in high regard with Goldman initiating coverage last month.
Stock price and analyst sentiment for SRCL in the last 5 years:
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Healthcare regulation continues to be beneficial for the firm. As private hospitals consolidate and generate larger amounts of waste, it makes economic sense to outsource treatment functions to a company like Stericycle. More stringent compliance standards for medical waste treatment will make insourced disposal expensive for large customers and even more so for small medical practices will limited scale economies.
Stericycle becomes a risk-reducing solution. SRCL has a safety and compliance training program called Steri-Safe for managing regulatory risks on its own. Stericycle customers don't have to worry about paying fines for minor transgressions under this program, another incentive to do business with SRCL.
Future growth will occur mainly in overseas markets as Stericycle exercises more acquisition options. The company estimates that the global market for specialized waste management is $15 billion, of which Stericycle had captured 13% by the end of 2012. Organic growth will occur as small onsite management converts to Stericycle's lower cost solutions.
Figures above from Stericycle.
Business Section: Investment Ideas
Waste Management (WM) is the largest and most well-known waste service but poses a minor threat. WM's annual report notes losses at 3 of its own medical waste facilities and projected operating losses. Medical waste collection is only a small part of WM's business.
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There seems to be a correlation between size and growth opportunity with Stericycle straddling market cap. and analyst recommendation.
Looking to trade in the space? While there are no direct competitors for Stericycle, we've included a list of other companies in the waste management sector so you can start your own research.
List of waste management companies: [Read descriptions for all companies mentioned]
1. Stericycle, Inc. (SRCL, Earnings, Analysts, Financials): Provides regulated waste management and related services in the United States, Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, and the United Kingdom. Market cap at $9.05B, most recent closing price at $105.12.
2. Waste Management, Inc. (WM, Earnings, Analysts, Financials): Provides waste management services to residential, commercial, industrial, and municipal customers in North America. Market cap at $18.05B, most recent closing price at $38.75.
3. Clean Harbors, Inc. (CLH, Earnings, Analysts, Financials): Provides environmental, energy, and industrial services. Market cap at $3.43B, most recent closing price at $56.67.
4. US Ecology, Inc. (ECOL, Earnings, Analysts, Financials): Provides waste treatment, disposal, recycling, and transportation services to commercial and government entities in the United States. Market cap at $463.13M, most recent closing price at $25.17.
5. Republic Services, Inc. (RSG, Earnings, Analysts, Financials): Provides nonhazardous solid waste collection, transfer, and disposal services in the United States. Market cap at $11.74B, most recent closing price at $32.49.
6. Waste Connections Inc. (WCN, Earnings, Analysts, Financials): Provides solid waste collection, transfer, disposal, and recycling services. Market cap at $4.34B, most recent closing price at $35.15.
Use Kapitall's Tools: Looking for ways to analyze this list?Use this article snapshot as a launch pad (click here for help): Simply click on the links, and use Kapitall's tab navigation to browse through the data...
Analyze These Ideas: Getting StartedRead descriptions for all companies mentioned Access a performance overview for all stocks in the list Compare analyst ratings for the companies mentioned Compare analyst ratings to annual returns for stocks mentioned Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, FilingsStericycle, Inc. (SRCL, Chart, Download SEC Filings) Waste Management, Inc. (WM, Chart, Download SEC Filings) Clean Harbors, Inc. (CLH, Chart, Download SEC Filings) US Ecology, Inc. (ECOL, Chart, Download SEC Filings) Republic Services, Inc. (RSG, Chart, Download SEC Filings) Waste Connections Inc. (WCN, Chart, Download SEC Filings)
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