Tweet
I am writing this on the airplane on the way to Florida to visit my good friends Bone, Scud, Bear, Murph and Titan Omega. I think when all of us get together something possibly could happen to the stability of the rotation of the Earth. We’ll see. What I do know for a fact is that after this weekend the oil will flow in abundance and we will generate an overabundance of hazardous waste. Someone is going to have to clean it up. I am sure if there was a company that specialized in picking up what no one else wanted to touch, this company would make a lot of money. Well there is a company that does just that.
Today I bought Stericycle (SRCL) at 91.17. I will sell it in 4 to 6 weeks at 105.03. Here’s why I like SRCL:
Well..it certainly all starts with the chart:
This stock is running up and up and up and just won’t stop. Why? Because this company makes a lot of money and is worth more every day. The stock is up 57% over the last 52 weeks. Not impressed? Over the same period the S&P 500 was up only 12%.
Stericycle, North America's largest regulated medical waste management company, serves customers throughout the U.S., Canada, Mexico, the United Kingdom, Ireland, Portugal and Romania, Argentina, Brazil, Chile and Japan (in fact they are still operating after the earthquake and tsunami). In addition to waste collection, transfer and disposal, the company provides OSHA compliance services, accreditation readiness monitoring software, hospital-acquired infection monitoring software, and expired medications return services. SRCL's global network includes 136 processing or processing/collection sites and 129 additional transfer, collection or combined transfer/collection sites. The company uses its network to provide the industry's broadest service offering, including medical waste collection, transportation and treatment, and related consulting, training and education services and products.
Stericycle is the largest provider of medical waste services in the U.S. It’s good to be the biggest, especially in an industry that is very highly regulated. What that means is that little guys can’t easily come in and steal your business by undercutting your price.
If you look at the larger demographic, you see population continuing to grow in the US. At the same time this population is living longer (good news). The bad news for us is that if we live longer we’ll also be older and need more medical care. More medical care means more medical waste. Now that’s bad news for us but we can hedge this because more medical care means more money for SRCL.
Case in point, during the most recent bloody recession, SRCL experienced continuous revenue and sales growth. In fact this company has grown its revenues and earnings seemingly forever. They have been doing it organically (with demographic growth) and through acquisitions of these aforementioned upstarts. They call on big hospitals and little doc in the boxes. Doesn’t matter. They take away your yucky stuff. It’s a service that their customers won’t (and mostly can’t) do by themselves. SRCL was outsourcing before outsourcing even was a word and Stericycle is doing it to the tune of almost 500,000 satisfied customers.
Besides hauling away medical waste, SRCL leverages their hospital relationships by providing other services such as "sharps" management to reduce the risk of needle sticks, disposal of expired pills and safety and compliance training. So think about it…you’re not buying Iphones and Uggs from these guys. This company is about as necessary as electricity - and it doesn’t have any real competition. It’s Godzilla. It’s Mothra. It’s Megalon and they are not going to stop in this country. Of the 17 buys made in the fourth quarter, 11 were outside the U.S. That’s right..while we were all watching Will and Kate get married, they were hauling away royal poop in jolly old England.
….and the money is rolling in. The results for the first quarter of 2011 are as follows: revenues were $398.1 million, up 18.8% from $335.2 million in the first quarter of '10; Net income attributable to Stericycle is $55.7 million or $0.64 per share on an as-reported basis and $0.68 adjusted for acquisition expenses and restructuring costs.
Today, less than 20% of their large customers are using multiple services, which leaves more than 80% of their “large” customer base available for growth.
During the first quarter this year, SRCL completed 9 acquisitions: 3 domestic and 6 international. The incremental revenue impact in the first quarter of 2011 was $1.8 million. There were 2 in the U.K., 2 in Romania, one in Ireland and one in Chile for a total of 6. Markets that they see opportunities remain in Northern Europe, Central Europe, Spain and all of Latin America.
How do they do it? They work with their customers to Protect People and Reduce Risk by combining integrated solutions with superior customer service to promote safety, compliance and risk management for their customers.
In a nutshell, Stericycle is AWESOME because:
That’s a lot of reasons and all of them are good ones. So what does this mean going forward?
SRCL will have more than double digit organic revenue growth for 2011, driven by increased small quantity (SQ) volume. This should expand gross margins in excess of 2010’s 46.4%. By amortizing fixed SG&A expenses over a wider customer base, SRCL will also improve its operating margins over the 31% margin posted in 2010.
Annual revenues in the U.S. regulated medical waste services market are $3 billion, and about $10.5 billion globally. The company believes its global market share increased to 13.7% in 2010, from 11.2% in 2009. That’s a trend in the proper direction.
Return on invested capital (ROIC) in the five years through 2010 averaged 11.4%,
versus 9.3% for the sub-industry group. Return on Equity is 22%. The company repurchased 1,461,005 shares for $95 million in 2010, bringing total share buybacks to 14.6 million shares. About 1.6 million shares remain available for repurchase. Obviously I am mentioning all of this because I think the earnings machine will keep rolling.
According to the company, ANAL-ysts' EPS estimates will be in the range of $2.79 to $2.82 on revenues of $1.61 billion to $1.64 billion. Ludicrous wasn’t just a rapper. $$$MR. MARKET$$$ sees 2011 revenues of $1.74 billion which would generate $2.98/share. If you take these projected earnings and multiply them by its recent historical PE of 38, you get a share price of $2.98 x 38 = $113.24, which is greater than my sales target.
You can put this all together and haul away another $$$MR. MARKET$$$ winner. Looks like I am about to do it again!
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Today I bought Stericycle (SRCL) at 91.17. I will sell it in 4 to 6 weeks at 105.03. Here’s why I like SRCL:
Well..it certainly all starts with the chart:
This stock is running up and up and up and just won’t stop. Why? Because this company makes a lot of money and is worth more every day. The stock is up 57% over the last 52 weeks. Not impressed? Over the same period the S&P 500 was up only 12%.
Stericycle, North America's largest regulated medical waste management company, serves customers throughout the U.S., Canada, Mexico, the United Kingdom, Ireland, Portugal and Romania, Argentina, Brazil, Chile and Japan (in fact they are still operating after the earthquake and tsunami). In addition to waste collection, transfer and disposal, the company provides OSHA compliance services, accreditation readiness monitoring software, hospital-acquired infection monitoring software, and expired medications return services. SRCL's global network includes 136 processing or processing/collection sites and 129 additional transfer, collection or combined transfer/collection sites. The company uses its network to provide the industry's broadest service offering, including medical waste collection, transportation and treatment, and related consulting, training and education services and products.
Stericycle is the largest provider of medical waste services in the U.S. It’s good to be the biggest, especially in an industry that is very highly regulated. What that means is that little guys can’t easily come in and steal your business by undercutting your price.
If you look at the larger demographic, you see population continuing to grow in the US. At the same time this population is living longer (good news). The bad news for us is that if we live longer we’ll also be older and need more medical care. More medical care means more medical waste. Now that’s bad news for us but we can hedge this because more medical care means more money for SRCL.
Case in point, during the most recent bloody recession, SRCL experienced continuous revenue and sales growth. In fact this company has grown its revenues and earnings seemingly forever. They have been doing it organically (with demographic growth) and through acquisitions of these aforementioned upstarts. They call on big hospitals and little doc in the boxes. Doesn’t matter. They take away your yucky stuff. It’s a service that their customers won’t (and mostly can’t) do by themselves. SRCL was outsourcing before outsourcing even was a word and Stericycle is doing it to the tune of almost 500,000 satisfied customers.
Besides hauling away medical waste, SRCL leverages their hospital relationships by providing other services such as "sharps" management to reduce the risk of needle sticks, disposal of expired pills and safety and compliance training. So think about it…you’re not buying Iphones and Uggs from these guys. This company is about as necessary as electricity - and it doesn’t have any real competition. It’s Godzilla. It’s Mothra. It’s Megalon and they are not going to stop in this country. Of the 17 buys made in the fourth quarter, 11 were outside the U.S. That’s right..while we were all watching Will and Kate get married, they were hauling away royal poop in jolly old England.
….and the money is rolling in. The results for the first quarter of 2011 are as follows: revenues were $398.1 million, up 18.8% from $335.2 million in the first quarter of '10; Net income attributable to Stericycle is $55.7 million or $0.64 per share on an as-reported basis and $0.68 adjusted for acquisition expenses and restructuring costs.
Today, less than 20% of their large customers are using multiple services, which leaves more than 80% of their “large” customer base available for growth.
During the first quarter this year, SRCL completed 9 acquisitions: 3 domestic and 6 international. The incremental revenue impact in the first quarter of 2011 was $1.8 million. There were 2 in the U.K., 2 in Romania, one in Ireland and one in Chile for a total of 6. Markets that they see opportunities remain in Northern Europe, Central Europe, Spain and all of Latin America.
How do they do it? They work with their customers to Protect People and Reduce Risk by combining integrated solutions with superior customer service to promote safety, compliance and risk management for their customers.
In a nutshell, Stericycle is AWESOME because:
- Attractive niche services
- Emerging global market
- Low cost provider
- Diverse customer base
- Strong financial performance
- Demonstrated growth strategy
- Proven ability to integrate acquisitions and improve margins
- Proven, experienced management team
- Total Estimated Global Market Size: $10.5 billion*
- Compliant management of potentially infectious material to reduce cross contamination risk and spread of infection
- Necessary Regulated Service
- Large Diverse Customer Base
- International Network Premier Assets
- Low Cost Operator
- Attractive Margins
- International Expansion
- Highly regulated industry
- Insulated from economic cycles
- 485,000 accounts (granularity). Revenue retention exceeds 95%
- Hospitals, Blood banks, Pharmaceutical manufacturers, Medical and Dental offices, Offsite and alternate care providers, Biomedical/Biotech companies, Laboratories/Pharmacies, Corporate America, Veterinary offices, Pharmacies
- Largest customer less than 2% of revenues
- Predictable revenues: over 95% of revenues are under long term contracts with automatic renewal
- Contracts generally include pass through price increase
- Attractive Margins
- Significant Penetration and Up-sell Opportunities
- International Expansion
- Promotes a safer workplace by reducing the infection risk from inadvertent needle sticks
- Promotes a compliant workplace by proper handling, segregation, transportation and disposal of pharmaceutical waste
- Remove expired or unsafe products from supply chain to reduce risk
- Data-driven notification, recall and returns solutions for pharmaceuticals, medicaldevices & durable goods
- Serving manufacturers, hospitals & retail pharmacies, distributors
- Proven integrator having successfully completed 213 acquisitions since 1993
That’s a lot of reasons and all of them are good ones. So what does this mean going forward?
SRCL will have more than double digit organic revenue growth for 2011, driven by increased small quantity (SQ) volume. This should expand gross margins in excess of 2010’s 46.4%. By amortizing fixed SG&A expenses over a wider customer base, SRCL will also improve its operating margins over the 31% margin posted in 2010.
Annual revenues in the U.S. regulated medical waste services market are $3 billion, and about $10.5 billion globally. The company believes its global market share increased to 13.7% in 2010, from 11.2% in 2009. That’s a trend in the proper direction.
Return on invested capital (ROIC) in the five years through 2010 averaged 11.4%,
versus 9.3% for the sub-industry group. Return on Equity is 22%. The company repurchased 1,461,005 shares for $95 million in 2010, bringing total share buybacks to 14.6 million shares. About 1.6 million shares remain available for repurchase. Obviously I am mentioning all of this because I think the earnings machine will keep rolling.
According to the company, ANAL-ysts' EPS estimates will be in the range of $2.79 to $2.82 on revenues of $1.61 billion to $1.64 billion. Ludicrous wasn’t just a rapper. $$$MR. MARKET$$$ sees 2011 revenues of $1.74 billion which would generate $2.98/share. If you take these projected earnings and multiply them by its recent historical PE of 38, you get a share price of $2.98 x 38 = $113.24, which is greater than my sales target.
You can put this all together and haul away another $$$MR. MARKET$$$ winner. Looks like I am about to do it again!
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Ya know, maybe if enough hits the wall, something will stick. Anyway they both looked good to me.
Comment