Sotera Health (SHC) AI Stock Analysis

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Sotera Health

(NASDAQ:SHC)

68Neutral

Sotera Health's stock is bolstered by strong technical momentum and a positive earnings outlook, but faces challenges from high financial leverage, a high P/E ratio, and recent legal settlements. Investors should weigh the growth prospects against valuation and leverage risks.

Positive Factors

Business Model

SHC has a durable business model with exposure to commercial pharmaceutical and medical devices, which are less volatile in an economic downturn due to the necessary nature of the products.

Financial Performance

Sotera is able to deliver strong top line growth and EBITDA margins due to high barriers to entry, critical positioning within the manufacturing process of its customers, and strong customer retention rates.

Growth Opportunities

SHC has a number of growth opportunities including driving synergies between Sterigenics and Nelson Labs, market consolidation following regulation changes, and capacity expansions.

Negative Factors

Litigation Risks

There is caution regarding potential litigation risk within their EO sterilization facilities as they face a number of ongoing cases.

Revenue Decline

The company faces a significant decline in RCA-related revenue in the first quarter, leading to a solidly negative volume and mix.

Supply Chain Risks

End-market and supply chain risks are rising, reflecting broader challenges in the stock market.

Sotera Health (SHC) vs. S&P 500 (SPY)

Market Cap

$3.65B

Dividend YieldN/A

Average Volume (3M)1.38M

Price to Earnings (P/E)148.4

Beta (1Y)0.89

Revenue Growth2.78%

EPS Growth-54.72%

CountryUS

Employees3,000

SectorHealthcare

Sector Strength53

IndustryMedical - Diagnostics & Research

Share Statistics

EPS (TTM)0.14

Shares Outstanding283,855,070

10 Day Avg. Volume1,259,279

30 Day Avg. Volume1,382,314

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.47

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit8.88

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$15.30

Price Target Upside19.07% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Sotera Health Business Overview & Revenue Model

Company DescriptionSotera Health Company provides sterilization, and lab testing and advisory services in the United States, Canada, Europe, and internationally. The company's sterilization services include gamma and electron beam irradiation, and EO processing; Nelson Labs comprise microbiological and analytical chemistry testing; and advisory services for medical device and biopharmaceutical industries. It serves medical devices; pharmaceuticals; food and agricultural products; and commercial, advanced, and specialty application industries. The company was formerly known as Sotera Health Topco, Inc. and changed its name to Sotera Health Company in October 2020. Sotera Health Company was incorporated in 2017 and is headquartered in Broadview Heights, Ohio.

How the Company Makes MoneySotera Health primarily generates revenue from its three business segments. The Sterigenics segment earns income by providing sterilization services to healthcare product manufacturers, ensuring their products meet safety and regulatory standards before reaching the market. This is achieved through various sterilization technologies tailored to different product needs. The Nordion segment contributes to revenue through the production and sale of Cobalt-60, a radioisotope critical for sterilization processes and cancer treatment. Lastly, the Nelson Labs segment makes money by offering a broad range of laboratory testing and advisory services that help clients comply with stringent industry regulations and enhance their product safety and efficacy. Key partnerships with healthcare companies and high demand for sterilization and testing services significantly bolster Sotera Health's earnings.

Sotera Health Financial Statement Overview

Summary

Sotera Health demonstrates strong revenue growth and operational efficiency. However, high leverage and variability in profitability and cash flow remain concerns. The company needs to manage its debt levels while continuing to focus on improving margins and cash flow stability.

Income Statement

Positive

Sotera Health has shown consistent revenue growth over the years, though the Gross Profit Margin and Net Profit Margin have demonstrated variability. The Gross Profit Margin remains strong at around 55%, indicating effective cost management. However, the Net Profit Margin is lower, impacted by fluctuating net income figures. Recent EBIT and EBITDA margins are stable, reflecting operational efficiency.

Balance Sheet

Positive

The balance sheet reveals a high Debt-to-Equity Ratio, suggesting significant leverage, which poses a risk in terms of financial stability. The Return on Equity (ROE) shows some improvement, indicating better profitability relative to shareholder equity. However, the Equity Ratio is relatively low, signaling potential concerns over asset financing.

Cash Flow

Positive

The cash flow statement illustrates a positive Free Cash Flow trend, although it has encountered fluctuations. The Operating Cash Flow to Net Income Ratio is favorable, suggesting efficient cash generation capabilities. While the Free Cash Flow to Net Income Ratio has improved recently, it had been negative in prior years, indicating past challenges in cash flow management.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.10B	1.05B	1.00B	931.48M	818.16M
	Gross Profit
602.29M	577.16M	557.00M	518.67M	443.57M
	EBIT
297.63M	276.69M	248.35M	256.73M	206.02M
	EBITDA
448.23M	420.20M	-2.99M	404.25M	319.96M
	Net Income Common Stockholders
44.40M	51.38M	-233.57M	116.88M	-37.49M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
277.24M	301.65M	396.29M	106.92M	102.45M
	Total Assets
3.07B	3.13B	3.12B	2.79B	2.76B
	Total Debt
2.35B	2.33B	1.95B	1.74B	1.82B
	Net Debt
2.07B	2.03B	1.56B	1.64B	1.72B
	Total Liabilities
2.67B	2.69B	2.77B	2.20B	2.31B
	Stockholders Equity
404.91M	443.73M	350.24M	586.10M	454.57M
Cash Flow		Free Cash Flow
45.09M	-362.71M	95.58M	179.38M	67.08M
	Operating Cash Flow
224.16M	-147.73M	277.96M	281.55M	120.58M
	Investing Cash Flow
-179.00M	-214.91M	-181.90M	-159.83M	-158.69M
	Financing Cash Flow
-50.56M	265.96M	197.76M	-117.29M	73.43M

Sotera Health Technical Analysis

Technical Analysis Sentiment

Positive

Last Price12.85

Price Trends

50DMA

11.52

Positive

100DMA

12.49

Positive

200DMA

13.77

Negative

Market Momentum

MACD

0.38

Negative

RSI

70.86

Negative

STOCH

90.96

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SHC, the sentiment is Positive. The current price of 12.85 is above the 20-day moving average (MA) of 11.31, above the 50-day MA of 11.52, and below the 200-day MA of 13.77, indicating a neutral trend. The MACD of 0.38 indicates Negative momentum. The RSI at 70.86 is Negative, neither overbought nor oversold. The STOCH value of 90.96 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SHC.

Sotera Health Risk Analysis

Sotera Health disclosed 46 risk factors in its most recent earnings report. Sotera Health reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Sotera Health Peers Comparison

Overall Rating

UnderperformOutperform

Sector (52)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HAE	69 Neutral	$3.19B	25.02	14.06%	―	8.14%	2.55%
SHC	68 Neutral	$3.65B	148.38	5.88%	―	2.78%	-54.72%
SGRY	66 Neutral	$2.95B	―	-8.90%	―	13.52%	-1296.44%
IRTC	64 Neutral	$4.32B	―	-111.13%	―	20.54%	25.73%
ICUI	55 Neutral	$3.31B	―	-5.76%	―	5.28%	-292.14%
Sector *	52 Neutral	$5.23B	3.70	-41.86%	2.84%	16.58%	-0.16%
CRSP	50 Neutral	$2.86B	―	-19.71%	―	-86.13%	-67.29%

* Healthcare Sector Average

Performance Comparison

SHC

Sotera Health

13.15

1.93

17.20%

HAE

Haemonetics

64.25

-29.00

-31.10%

ICUI

ICU Medical

134.50

33.90

33.70%

SGRY

Surgery Partners

23.16

-4.01

-14.76%

IRTC

Irhythm Technologies

136.19

37.43

37.90%

CRSP

Crispr Therapeutics AG

34.25

-19.04

-35.73%

Sotera Health Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q1-2025)

% Change Since: 11.74%|

Next Earnings Date:Aug 06, 2025

Earnings Call Sentiment Positive

Sotera Health demonstrated robust growth in revenues and EBITDA, notably in Nelson Labs and Nordion, and maintained a positive outlook for 2025. However, challenges such as the Cobalt-60 shipment timing, a GAAP net loss due to legal settlements, and revenue decline in Nelson Labs advisory services were noted. Despite these lowlights, the positive developments and reaffirmed growth outlook suggest a resilient performance.

Q1-2025 Updates

Positive Updates

Solid Start to 2025 with Revenue and EBITDA Growth

Sotera Health reported a 2.6% increase in total company revenues, or 4.4% on a constant currency basis, for Q1 2025 compared to Q1 2024. Adjusted EBITDA increased by 8.8%, or 11.2% on a constant currency basis.

Nelson Labs Margin Expansion

Nelson Labs achieved a 479 basis point margin expansion versus Q1 2024, marking the third consecutive quarter of year-over-year margin expansion.

Nordion's Strong Revenue Performance

Nordion's revenue increased by 36% to $33 million, or 40.6% on a constant currency basis, compared to Q1 2024. Segment income increased approximately 62%.

Reaffirmed 2025 Outlook

Sotera Health reaffirmed its 2025 outlook, expecting revenue growth in the range of 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis.

Successful Amendment to Revolving Credit Facility

The amendment added approximately $175 million in liquidity, extending maturity to April 2030.

FDA Clearance for Bionic Pancreas

Sotera Health played a critical role in securing FDA clearance for the first-ever bionic pancreas, showcasing the integrated expertise of Nelson Labs and Sterigenics.

Negative Updates

Impact of Cobalt-60 Shipment Timing on Nordion

Nordion's Q1 revenue exceeded expectations due to a shift in Cobalt-60 shipments, which will impact Q2 revenue.

Net Loss Due to Settlement of EO Claims

Sotera Health reported a GAAP net loss of $13 million, or $0.05 per diluted share, due to a $31 million settlement of EO claims in Illinois.

Decline in Nelson Labs Advisory Services Revenue

Nelson Labs experienced a decline in revenue by 9.3% due to a decrease in expert advisory services, despite offsetting improvements in core lab testing.

Foreign Currency Headwinds

Foreign currency presented a 180 basis point headwind for the quarter, most pronounced in the Canadian-based Nordion business.

Company Guidance

During the first quarter of 2025 earnings call, Sotera Health provided guidance indicating a strong start to the year, with revenue increasing by 2.6% or 4.4% on a constant currency basis compared to Q1 2024. The company reported an adjusted EBITDA growth of 8.8% or 11.2% on a constant currency basis. The adjusted EPS for the quarter was $0.14, showing a $0.01 improvement from the previous year. Sotera reaffirmed their full-year 2025 outlook, expecting revenue growth between 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis. The company anticipates a foreign exchange headwind of approximately 1.25% on revenue and 1.5% on adjusted EBITDA. Additionally, Sotera expects a net leverage ratio improvement, with capital expenditures projected between $190 million to $210 million for 2025, and a goal to generate $500 million to $600 million in free cash flow over the next three years.

Sotera Health Corporate Events

Legal Proceedings

Sotera Health Settles Ethylene Oxide Claims for $30.9M

Negative

Apr 4, 2025

On April 3, 2025, Sterigenics U.S., LLC, a subsidiary of Sotera Health Company, agreed to a settlement of $30,943,000 to resolve 97 ethylene oxide claims related to its former Willowbrook, Illinois facility. The settlement, which requires participation from all claimants and court approval, is not an admission of liability by Sterigenics and is expected to be finalized within 60 to 90 days, potentially impacting the company’s legal standing and stakeholder relations.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.