Stericycle Finding Treasure in Trash: SRCL, WM, RG, SMED

November 01, 2012, 09:39 am ET, BY Barry C.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Can Stericycle (NASDAQ:SRCL) continue to turn trash into treasure for investors? That certainly appears to be the case. The suburban Chicago company specializing in treating and disposing of infectious medical waste hit a 52-week high last week. The bump in share price came after Stericycle reported revenue for the third quarter ended Sept. 30, 2012, jumped more than 14 percent from the same period a year earlier. The company’s gross profit was up a healthy 13.4 percent.  But the lingering question is how to trade it.  Our real time trading reports help investors figure out exactly how to trade stocks like this. PROFIT FROM THESE STOCKS TODAY!

Stericycle continues to flex its muscles in an industry the company says was worth $15 billion worldwide in 2011. Unless some big solid waste players such as Waste Management (NYSE:WM) Republic Services (NYSE:RG) decide to re-enter a market they abandoned years ago, Stericycle appears poised to remain a men among boys for the foreseeable future.

Moreover, the company is ideally positioned to take advantage of projected industry growth. That’s going to be driven by an aging population requiring more medical services, health care cost pressures, tougher environmental regulations, medical waste treatment moving outside hospitals and expansion outside the United States.

Even with its dominant position in medical waste, Stericycle has plenty of upside. After all, the company owns just 13 percent of the worldwide market, the rest belonging to onsite management systems and other competitors, many of the latter being local or regional firms. Acquisitions have played a major role in Stericycle’s growth, and the company began expanding outside of the United States in 1998. It has a foothold in Japan, Argentina, Mexico, Canada and the United Kingdom, among others.

One company competing in Stericycle’s space is Sharps Compliance Corp. (NASDAQ:SMED). Calling Sharps a competitor, however, might be somewhat of a stretch. The Houston-based firm, which specializes in collecting sharps such as needles and syringes, hasn’t exactly wowed investors. Analysts project Sharps will lose 8 cents a share in its current fiscal year ending in June 2013 before returning to modest profitability the following year. Little wonder that the company trades at just above $3 a share, about the middle of its 52-week range.

Investors might be concerned that Stericycle is a bit pricey. After all, it sells at a lofty P/E of 31 based on trailing earnings. That’s almost twice as high as solid waste behemoths Waste Management and Republic Services. Then again, the margins in medical waste are much fatter.

Just how much upside does Stericycle hold for investors? Analysts estimate Stericycle will earn $3.28 per share in 2012 and $3.66 in 2013. If the company’s P/E holds, there may be another $10 to $20 of headroom.  For more information about stocks in this space, our real time trading reports help investors identify opportunities before they happen.

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