Cleaning Up at Stericycle

Three years ago, this column highlighted Stericycle (SRCL ), then the second-largest U.S. provider of medical-waste-management services, trading at 18 a share. Investment pro Andrew Lanyi had a 12-month target of 30 for the stock. It has since quadrupled--to 73 on May 15--as Stericycle became No. 1 in the industry.

Lanyi, who heads Lanyi Research at CIBC Oppenheimer, still favors Stericycle and continues to own shares despite its runup and price-earnings ratio of 37, based on estimated 2002 earnings. He thinks it will hit 100 by yearend. "The company, 15 times the size of its nearest competitor, has become a virtual monopoly in a very profitable business," says Lanyi. No matter what the economy does, Stericycle continues to grow, he says.

It collects medical waste from health-care facilities and carts it to 36 treatment centers where it is disposed of in accordance with environmental rules. Plenty of medical companies now outsource their handling of waste, driving Stericycle's customer roll to nearly 6,000 hospitals and clinics. Hemant Wadhwa at Lanyi Research sees earnings growing 20% to 25%. He sees revenues of $396 million in 2002 and $428 million in 2003, up from $359 million in 2001. Wadhwa predicts earnings will reach $1.97 a share in 2002 and $2.32 in 2003, up from $1.54 in 2001.

By Gene G. Marcial

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