STERIS is a defensive, wide-moat sterilization compounder with 80% recurring revenue, mid-single-digit growth, and a probability-weighted five-year value of $347.22.
Overview
STERIS is a mission-critical infection-prevention and contamination-control provider serving hospitals, medical-device manufacturers, and biopharmaceutical producers. Following the May 31, 2024 Dental divestiture for $787.5 million, it is focused on Healthcare, AST contract sterilization, and Life Sciences. **The business is unusually defensive: approximately 80% of revenue comes from recurring services and consumables**, while regulatory validation, installed equipment, and network scale create high switching costs. Q1 FY2027 revenue rose 7.30% year over year to $1.4927 billion, with 6.0% constant-currency organic growth; adjusted EPS rose 10.7% to $2.59, beating the $2.51 consensus, and adjusted EBIT margin expanded 100 basis points to 23.8% despite $14 million of tariff headwinds. Management reaffirmed FY2027 guidance of 7% to 8% reported revenue growth, 6% to 7% organic growth, and $11.10 to $11.30 adjusted EPS. Valuation is premium but defensible at 20.59x trailing P/E, 3.9x P/S, and 15.55x EV/EBITDA, supported by 11.9% ROCE, a $1.0 billion buyback, and 21 consecutive dividend increases. Near-term catalysts are North Carolina consolidation savings, AST volume recovery, pricing, and capital returns; the principal offsets are EtO litigation, transition execution, and elevated capex.