Sotera Health (SHC) is a midsize company that has experienced steady revenue growth and has a strong presence in the healthcare space. The company provides sterilization, lab testing, and advisory services both in the United States and globally, and supplies sterilization services for a variety of medical products such as procedure kits and trays, implants, and catheters from its Sterigenics and Nordion business lines.
Sotera has recently seen its stock price take a hit due to litigation challenges, but this should be seen as an opportunity for investors looking for a high upside stock. Despite the negative headlines, Sotera has had a strong performance this year, as evidenced by their second quarter results. The company reported a GAAP profit of 11 cents a share, with revenue growth of nearly 6% year-over-year to just over $266 million. Additionally, adjusted EBITDA rose just over 1% from Q2 2020 to $136 million.
Looking ahead, Sotera has provided FY 2022 guidance with net revenues in the range of $1.0 to $1.022 billion, representing growth of approximately 7% to 10%. Additionally, adjusted EBITDA is projected to be in the range of $515 to $525 million, with adjusted EPS in the range of $0.93 to $0.97. This growth is more impressive when considering the impact of the strong dollar during the quarter; on a common currency basis, sales growth would have been 9%.
Despite the recent litigation challenges, Sotera has a strong balance sheet and is well-positioned to weather any storm. The company ended the second quarter with $140 million in cash and marketable securities against $1.8 billion of debt. Additionally, the company’s net leverage ratio remained stable at 3.4x, within the company’s stated range of 2.0x to 4.0x.
All in all, Sotera appears to be a strong stock with potential for high upside. The stock is currently trading at around seven bucks a share and has an approximate market capitalization of just south of $2 billion. Investors should also take into account that the current analyst firm consensus has the company earning some 95 cents a share in FY 2022 as revenues rise in the high single digits to just over $1 billion. Furthermore, similar sales growth is expected in FY 2023 when Sotera is projected to make roughly $1.10 a share. With strong fundamentals, a strong balance sheet, and a potential for high upside, Sotera is a stock to watch and potentially invest in.
