Stericycle, Inc.’s (SRCL - Free Report) stock has gained 22.4% year to date, outperforming the 14% rally of the Zacks S&P 500 composite.
With an expected long-term earnings per share growth rate of 7.7% and a market cap of $4.1 billion, Stericycle seems to be a stock that investors should retain in their portfolio for now.
Factors That Bode Well
Stericycle is progressing well with its comprehensive multiyear business transformation, aimed at improving long-term operational and financial performance. Initiated in 2017, the five key initiatives of the program include portfolio rationalization, operational optimization, organizational excellence and efficiency, commercial excellence and strategic sourcing.
The company’s main focus for 2019 is to build, test and train phases of enterprise resource planning (ERP) implementation. It has completed the build phase and is currently in the test phase which will be followed by the train phase. The company expects to witness $850 million to $1 billion of adjusted EBITDA benefits over the tenure of the program.
Stericycle’s acquisition pool remains robust in multiple geographies and lines of business, thereby helping it increase its market share and expand geographically.
Despite riding on significant growth prospects, Stericycle is not free from overhangs. The company’s communication and related services have been weak for quite some time due to decline in recall events and lower call volumes in communication solutions. It has a debt-laden balance sheet and faces pricing pressure due to high competition. Nevertheless, we believe that the multiyear business transformation initiative and acquisitions bode well in the long term.
Zacks Rank & Key Picks
Currently, Stericycle has a Zacks Rank #3 (Hold).
Some top-ranked stocks in the broader Zacks Business Services sector are Navigant Consulting , Global Payments (GPN - Free Report) and NV5 Global (NVEE - Free Report) . While Navigant Consulting sports a Zacks Rank #1 (Strong Buy), Global Payments and NV5 Global carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rate for Navigant Consulting, Global Payments and NV5 Global is 13.5%, 16.9% and 20%, respectively.
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