Stericycle, Inc. (SRCL - Free Report) is benefitting from focus on improving solution offerings and platforms, which is aiding the company to grow organically.
With expected long-term earnings per share (EPS) growth rate of 9.1% and a market cap of $4.7 billion, Stericycle is a stock that investors should retain in their portfolio now.
Let’s take a look at the factors that bode well for the company.
Stericycle continues to grow on the back of acquisitions in the domestic and international markets. A global acquisition strategy boosts the company’s customer base by providing a long-term growth platform for offering multiple services.
In the first half of 2018, Stericycle completed 15 acquisitions, which contributed $15.2 million to top-line growth. In 2017 and 2016, Stericycle completed 30 and 31 acquisitions, respectively. Further, acquisitions contributed $570.1 million and $32.2 million to 2016 and 2017 revenues, respectively.
Consistent Efforts to Develop Internally
Stericycle’s efforts toward internal development bode well. The company is improving solution offerings and platforms to meet customer demands more effectively. This has enabled Stericycle build a strong and loyal customer base, having a revenue retention rate of nearly 90%.
The company is trying to grow by selling additional services to the existing ones as well as attract new customers on the back of strong client relationships.
Focus on Regulated Business-to-Business Services
Stericycle provides assistance to customers and businesses to comply with the tough regulatory policies. It mainly focuses on smaller businesses with high demand for regulatory assistance compared with larger businesses, due to the lack of specialized staff. To this end, the company is offering services, depending on varying customer needs.
We believe that this business strategy will help the company earn profits as well as expand into additional service offerings like hazardous or pharmaceutical waste management, communication services as well as secure information destruction.
In spite of significant growth prospects, Stericycle is not free from headwinds. The company is susceptible to pricing pressure due to intense competition. It has a debt-laden balance sheet that may limit future expansion and worsen risk profile. However, we believe that internal growth, strategic acquisitions and strong customer base bode well for Stericycle in the long term.
Zacks Rank & Stocks to Consider
Currently, Stericycle carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Business Services Sector include ICF International, Inc. (ICFI - Free Report) , Information Services Group, Inc. (III - Free Report) and Paychex, Inc. (PAYX - Free Report) , each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for ICF International, Information Services and Paychex is 10%, 14%, and 8.4%, respectively.
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