STERIS plc (STE): what the price requires

At today's price, STERIS plc (STE) is priced for +17.1% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/STE

Headline

FieldValue
TickerSTE
CompanySTERIS plc
Sector / IndustryHealthcare
Current price$216.79/sh
CompositionService revenues 48% / Consumable revenues 30% / Capital equipment revenues 21%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed7.4%
Operating margin today18.0%
Margin compression implied-10.6pp
Implied growth17.1%
Multiple paid22x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.3pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.22σ
cohort percentile (of 112 peers)54
sustained it ~5 years at this level41%
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.34x5expensive
Earnings2.54x5expensive
Relative0.96x5justifies
Growth0.89x3justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$250.130.87xyesFCF base $1.0B, growth 9% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection
DCF Exit MultipleGrowth$243.590.89xyesExit EV/EBITDA: 17.2x / 19.2x / 21.2x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$192.061.13xyesP/E 24x (static sector reference · 2026-04), scenarios: 20.0x / 24.0x / 28.0x (bear / base = reference held flat / bull), EV/EBITDA 16x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$85.772.53xyesBV/sh $72.86, ROE (TTM) 10.9%, ke 9.3%
Two-Stage Excess ReturnAsset$92.782.34xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$184.511.17xyesRev $5.9B, growth 9% (input: historical growth; tapered), Terminal P/S: 3.0x / 3.6x / 4.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$226.860.96xyesEPS $7.93, growth 29% (input: historical EPS growth), PEG=0.95 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$49.844.35xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.82B × (1−28%) / WACC 8.5% → EPV (no growth)
Residual IncomeAsset$94.122.30xyesBV $72.86 + 5yr PV of (ROE (TTM) 10.9% − Kₑ 9.3%) × BV; BV grows 7.1%/yr
Graham NumberAsset$114.011.90xyes√(22.5 × EPS $7.93 × BVPS $72.86) — Graham's conservative floor
EV/EBITDA RelativeRelative$177.001.22xyesEBITDA $1.22B × sector EV/EBITDA 16.0x
FCF YieldEarnings$85.452.54xyesFCF $972.4M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$78.682.76xyesSBC-adj FCF $0.91B (FCF $0.97B − SBC $0.06B) capitalized at Kₑ
Ben Graham FormulaEarnings$255.870.85xyesEPS $7.93 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$21.2610.20xyesBV $72.86 × (ROIC 2.5% / WACC 8.5%)
P/Sales SectorRelative$240.810.90xyesRevenue $5.94B × sector P/S 4.0x
PEG Fair ValueRelative$297.380.73xyesEPS $7.93 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$85.732.53xyesEPS $7.93 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$1.5b
Net debt / NOPAT (after-tax)2.02x
Net debt / operating income (pre-tax)1.46x
Interest coverage15.9x
Share count CAGR (buyback)-0.6%
Burning cashno

Bullet Takeaways

Bull Case

Healthcare-equipment companies are hard to value because the razor and the razorblade get lumped together, and STERIS is worth separating. The durable value is not the sterilizers and surgical tables it sells but the consumables and service that follow them for a decade. The 10-K describes the recurring layer directly, the "deferred revenue balances" from service contracts and the product revenues that "consist of revenues generated from sales of" consumables tied to the installed base. Once a hospital standardizes on STERIS sterilization, the detergents, indicators, and maintenance contracts recur regardless of the capital-equipment cycle, which is why the business grows steadily through hospital budget swings.

The growth is broad-based and management just raised the bar. First-quarter fiscal 2026 revenue rose about 9% to roughly $1.4 billion, with all three segments contributing: Healthcare up 8% to about $975 million, Applied Sterilization Technologies up 13% to about $281 million, and Life Sciences up 5% to about $135 million. STERIS lifted its full-year revenue-growth outlook to 8% to 9% from 6% to 7% while holding adjusted EPS guidance of $9.90 to $10.15. The Applied Sterilization Technologies segment, which sterilizes medical devices for manufacturers under contract, is the standout: a scarce, capital-intensive service with few credible competitors.

The cash generation funds the compounding. STERIS raised its fiscal 2026 free-cash-flow outlook to about $820 million from $770 million, carries manageable net debt of about $1.5 billion against operating income near $1.1 billion, and enjoys interest coverage above 18 times. The share count has drifted down slightly, and the balance sheet has room for the bolt-on acquisitions that have long extended STERIS's installed base. A business built on recurring consumables and service, growing high-single-digits across every segment, throwing off more than $800 million of free cash flow, is the kind of durable healthcare compounder that earns a premium multiple, and management raising the growth outlook mid-year is the signal the durability is intact.

Bear Case

The moat-erosion case for STERIS is subtle, because the erosion shows up not in lost customers but in the price the market pays for durability that may grow slower than the multiple assumes. The 10-K itself concedes the pressure: healthcare cost-reduction measures "initiated by competitive pressures as well as legislators, regulators and third-party payors" push back on pricing, and hospitals under budget strain defer the capital-equipment purchases that seed the future consumables stream. The recurring razorblade base is durable, but its growth depends on placing new razors, and a prolonged squeeze on hospital capital spending slows the flywheel even if it never reverses it.

Tariffs and input costs are eating into the margin story right now. STERIS raised its estimated fiscal 2026 tariff hit to about $45 million of pre-tax profit, up from $30 million previously, and held adjusted EPS guidance flat even as it raised the revenue outlook, which means the incremental revenue is not dropping through to earnings at the prior rate. A company that raises its sales forecast but not its profit forecast is telling you costs are absorbing the upside.

The valuation is where the caution concentrates. At about $215.89 (July 10, 2026), the asset and earnings-power methods land well below the price, near $50 to $95, because trailing return on invested capital is only about 2.5% on a large capital base built through acquisition-driven goodwill. Only the relative-multiple and growth-DCF methods reach the price. Trailing EPS is about $7.93, so at $215.89 the stock trades near 27 times trailing earnings, and even against management's roughly $10 forward adjusted EPS guidance it is about 21 times a computed forward figure. That is a premium that requires the high-single-digit growth to persist for years while margins hold against tariffs and hospital pricing pressure. The bet the price makes is that the recurring model compounds durably enough to justify a rich multiple, with the earnings-power methods sitting far below as the measure of how much of the price is paying for future durability rather than present returns.

Valuation

STERIS is a durable healthcare compounder the peer-multiple and growth methods justify while the asset and earnings-power methods call expensive. At $215.89 (July 10, 2026), a sector price-to-earnings multiple near 24 times reaches about $192, close to the price, and the discounted cash-flow methods on high-single-digit growth land near $243 to $250, above it, which is why those families support the level. Against them, the earnings-power methods land far lower, a normalized earnings-power value near $50 and free-cash-flow capitalization near $85, and the asset methods near $85 to $95 because trailing return on invested capital is only about 2.5% on an acquisition-built capital base. The gap between the roughly $216 price and the sub-$100 earnings-power reads is the durability premium the market pays for the recurring consumables-and-service model.

The most concrete anchor is the growth the multiple needs. STERIS grew revenue about 9% in the first quarter across all three segments and raised its full-year revenue outlook to 8% to 9% while holding adjusted EPS at $9.90 to $10.15. Trailing EPS of about $7.93 puts the stock near 27 times trailing earnings, and near 21 times the roughly $10 forward adjusted figure, a computed number. The price works if the high-single-digit growth persists and margins hold; it weakens if the tariff drag, now about $45 million of pre-tax profit, or hospital pricing pressure caps the earnings conversion.

Solvency is a genuine strength and bounds the downside. Net debt of about $1.5 billion runs only about 1.37 times pre-tax operating income, interest coverage is above 18 times, and management raised the fiscal 2026 free-cash-flow outlook to about $820 million. The company is not burning cash, and the share count has edged down. The balance sheet removes financial risk and leaves room for the bolt-on deals that extend the installed base, so the downside is valuation, not solvency. A buyer at today's price is underwriting years of durable high-single-digit growth and steady margins from the recurring model, with the earnings-power methods sitting far below as the reminder of how much of the price is forward durability rather than present return on capital.

Catalysts

The first-quarter fiscal 2026 report was the key recent catalyst: revenue up about 9% to roughly $1.4 billion, adjusted EPS of about $2.83 versus $2.74 a year earlier, and growth across all three segments, Healthcare up 8% to about $975 million, Applied Sterilization Technologies up 13% to about $281 million, and Life Sciences up 5% to about $135 million. STERIS raised its full-year revenue-growth outlook to 8% to 9% from 6% to 7%, lifted its free-cash-flow outlook to about $820 million from $770 million, and held adjusted EPS guidance at $9.90 to $10.15.

The swing factor near term is the tariff drag, which management raised to about $45 million of pre-tax profit from $30 million previously, the reason revenue guidance rose while EPS guidance held. The forces to watch through fiscal 2026 are hospital capital-spending trends that seed the future consumables stream, the durability of double-digit growth in the contract-sterilization segment, and whether cost pressure keeps capping the conversion of revenue growth into earnings. The next quarterly report is the checkpoint on that revenue-to-EPS gap.

Peer Cohorts (Per Segment, With Filing Citations)

Healthcare (reported)

Applied Sterilization Technologies (reported)

Life Sciences (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 FY2026 earnings release, 2026 · Q1 FY2026 earnings release

View the full interactive STE report on boothcheck