STERIS plc (STE)

Conclusion

STERIS plc (STE.US) is a US healthcare company that supplies infection prevention products, sterilization equipment and related services. At a price of 256.94 USD on 2026-11-09, its market capitalisation is 25.1 billion USD.

The verdict is fair. The fair value band runs from 206.94 to 310.40 USD, with a midpoint of 258.67 USD and a margin of safety of 0.7% at the current price. The P/E of 30.3 sits against a ten-year median of 40.4, and EV/EBITDA of 16.1 against 18.7. The DCF gives 220.65 USD per share, and the fair value from historical multiples is 296.69 USD. The reverse DCF implies growth of 10.3% a year, while revenue has compounded at 13.8% over five years and free cash flow per share at 13.4%.

The strongest supports are net debt to EBITDA of -0.19, meaning net cash, a Piotroski score of 9 out of 9, and ROIC of 12.5% against a WACC of 9.2%. The weakest points are the margin of safety of 0.7%, which leaves little cushion, the DCF value of 220.65 USD, well below the current price, and the share count, which has grown at 2.8% a year over five years.

Financial health

Financial strength is green, held up by net cash, a current ratio of 2.05 and interest coverage of 20.5x. Net debt to EBITDA is -0.19, debt to equity is 0.03 and the quick ratio is 1.27, so leverage is minimal. The Altman Z-score is not available because the inputs needed to calculate it are missing. The Altman model was designed for manufacturers, so it would be only a rough guide for a medical device company even with complete inputs. Insolvency risk: low, about 0.09% by the estimate of the Ohlson model over one to two years, based on figures as of 2026-03-31.

Earnings quality

Earnings quality is green, supported by free cash flow conversion of 113.3% on a trailing basis and 148.2% over five years, and by a Piotroski score of 9 out of 9. The accrual ratio is -5.3%, which indicates that reported earnings are well backed by cash. Stock-based compensation is 0.5% of revenue, and free cash flow after it is 908.6 million USD. The share count has grown at a compound rate of 2.8% over five years, so shareholders have been diluted rather than helped by buybacks. The Beneish M-score is not available. Over the last eight quarters, earnings beat estimates five times and missed once, with an average surprise of 1.8%. Over 90 days, the current-year earnings estimate changed by 0.4%, with five upward and one downward revision in the last 30 days.

Profitability

Profitability is green. ROIC is 12.5% against a WACC of 9.2%, and the given ROIC minus WACC value of 3.3% points to value creation. The five-year median ROIC is 6.8%, so the current level is above its longer-run record. Operating margin is 18.9% against a ten-year median of 16.1%, gross margin 44.6% against 43.4%, and net margin 13.4% against 11.0%. Operating margin stability is 19.3%. Return on equity is 11.4%. The DuPont split shows a net margin of 13.2%, asset turnover of 0.55 and an equity multiplier of 1.49, so the return on equity is not inflated by leverage.

Growth

Growth is green. Revenue compound growth is 9.4% over three years, 13.8% over five and 10.2% over ten. Revenue grew in all 10 of the last 10 years. EPS compound growth is 95.3% over three years, 11.5% over five and 17.7% over ten. The three-year figure is far above the other two and should be read with care. Free cash flow per share grew at 35.7% over three years, 13.5% over five and 18.5% over ten. The next-year EPS estimate implies growth of 10.1%.

Valuation

Valuation is yellow, because the verdict is fair and the margin of safety of 0.7% is neutral. The P/E of 30.3 is set against a ten-year median of 40.4, a premium of -25.0%. EV/EBITDA of 16.1 is set against 18.7, a premium of -13.5%, and P/FCF of 26.7 against 34.4, a premium of -22.3%. P/S of 4.06 is set against 4.37, a premium of -7.1%, and P/B of 3.45 against 3.48, a premium of -1.0%. The DCF gives 220.65 USD per share at a discount rate of 9.18%, and the terminal value makes up 57.6% of it. The fair value band rests on fixed assumptions and is an order of magnitude, not a price target. The reverse DCF implied growth of 10.3% is given as -3.5% against revenue growth over five years and -3.2% against free cash flow per share growth. The dividend yield is 1.0%, the forward yield 1.2%, and the payout on free cash flow 26.9%.

Risks

The margin of safety of 0.7% leaves little room for error, so any shortfall in the growth the market already assumes would quickly erase the cushion. The DCF value of 220.65 USD is well below the current price, and a valuation that relies on it would look expensive. Returns above the five-year median ROIC of 6.8% may not last. A share count rising at 2.8% a year dilutes value per share. The Altman Z-score and the Beneish M-score are not available because their inputs are missing. This analysis also has no debt maturity schedule and no revenue by segment, so it cannot test how the three business lines behave separately.