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Reasons to Retain Stericycle (SRCL) Stock in Your Portfolio

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Stericycle, Inc. (SRCL - Free Report) stock has had an impressive run over the past month. The company returned 15.6%, which compared favorably with the 12.2% rise in the industry it belongs to and the Zacks S&P 500 composite’s 5.8% growth. The company has an expected long-term earnings per share (three to five years) growth rate of 8%.

Factors That Augur Well

Being a leading player in the waste management industry, Stericycle should benefit from ongoing trends such as increasing environmental concerns, rapid industrialization, increase in population and active government measures to reduce illegal dumping.

The services that Stericycle provides cannot usually be delayed and are required on a routine and scheduled basis. This helps the company to achieve a steady flow of revenues. Stericycle has strong customer relationships, boasting of long-term contracts ranging from three to five years. This enables the company to maintain a revenue retention rate of around 90%.

Stericycle is progressing well with its comprehensive multi-year Business Transformation initiative aimed at improving long-term operational and financial performance. The five key objectives of the program include improving the quality of revenues, driving operational efficiency through work measurement, asset optimization, technology and strategic sourcing, portfolio rationalization through divestitures, debt reduction and leverage improvement, and ERP implementation.

Some Risks

Stericycle has more long-term debt outstanding than cash. Cash and cash equivalent balance at the end of the second quarter of 2022 was $46 million compared with the long-term debt level of $1.7 billion.

Zacks Rank and Stocks to Consider

Stericycle currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Avis Budget Group, Inc. (CAR - Free Report) , Genpact Limited (G - Free Report)  and H&R Block, Inc. (HRB - Free Report) .

Avis Budget sports a Zacks Rank #1 (Strong Buy) at present. CAR has an earnings growth rate of 108.4% for 2022. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avis Budget delivered a trailing four-quarter earnings surprise of 69.5%, on average.

Genpact carries a Zacks Rank #2 (Buy) at present. G has a long-term earnings growth expectation of 12.1%.

Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.

H&R Block currently flaunts a Zacks Rank of 1. HRB has a long-term earnings growth expectation of 12.5%.

HRB delivered a trailing four-quarter earnings surprise of 19.2%, on average.

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