STE – Market expectations are for Uniform ROA to expand, but management may have concerns about their Cantel acquisition, backlog, and growth

March 30, 2022

  • STERIS plc (STE) currently trades above corporate and historical averages relative to Uniform earnings, with a 47.9x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to 31% in 2026, accompanied by 5% Uniform asset growth.

  • However, analysts expect Uniform ROA to decline to 17% by 2023, accompanied by 16% Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $178, representing approximately 23% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about their Cantel acquisition, backlog, and growth.

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