Financial Analysis of Steris Corporation: Debt and Share Price Analysis

This article provides a financial analysis of Steris Corporation, including debt and share price analysis. It includes bond analysis, ratings rationale, share price analysis, and conclusion.

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Table of Contents
Introduction......................................................................................................................................3
Bond Analysis..................................................................................................................................3
Ratings Rationale.............................................................................................................................4
Share Price Analysis........................................................................................................................5
Conclusion.......................................................................................................................................6
Reference.........................................................................................................................................8
Appendix..........................................................................................................................................9

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Introduction
Steris Plc headquartered in the United Kingdom founded in the year 1985 provides
innovative life care, health care and various other science products for providing better health
care solutions. Steris Health Care is listed in the New York Stock Exchange with its ticker
symbol “STE”. The current share price of the company is around US$ 122.38. The company is
having long-term debts in the books of accounts in the form of senior notes and Bonds (Roberts
et al. 2014). The share price analysis of the Steris Corporation was done for the five-year trend
and the analysis of the same was done by incorporating the factors supporting the movement of
the same.
Bond Analysis
The Steris Corporation Debt were analysed by the Moody’s Investors Service where the
company include B2 Corporate Family Ratings, B2- Probability of Default Rating Bonds, 475
million Senior Secured Notes Payable in the year 2018. The credit rating of the company in the
year 2011 has remained unchanged for the company following private placement of $95 million
of Senior Holdco PIK notes, which is due, and payable in the year 2019 (remains unrated for the
company bond). The company also borrowed some additional debt, which was used for funding
the distribution that was done to the shareholders of the company. Moody’s Credit Rating
Agency gave a negative review for the company issuance of additional debt, which it borrowed
as the total outstanding debt of the company increased consistently for the company (Nikolov,
Schmid & Steri, 2018). However, the company rating had remained unchanged. The 475 Million
senior secured notes is payable in the year 2018 which was changed to B2 (LGD 3, 46%) from
B2 (LGD 4, 54%). The following rates were done for the company bond in the year 2015:

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 Corporate Family Rating of B2;
 Probability of Default Rating of B2-PD;
 Senior Secured Credit Facilities of B2, LGD3
 $475 million Senior Secured Notes due 2018 of B2, LGD 3
The above review was done by the Moody Investor services after reviewing the
announcement done by the Sterigenics claiming that affiliates of Warburg Pincus will be
recapitalizing the Steriginics Company. The recapitalization plan is seen as an increase in
the financial leverage of the company regarding the volatile capital structure that the
company will be facing.
Ratings Rationale
The B2 Corporate Family rating which has been downgraded due to the modest scale of
Sterigenics and business concentration in the sterilization contracting services done by the
company. Processing of various Medical Isotypes and at the same time there are significant
supplier of the products and services and concentration of small group of consumer’s increases
the business risk of the company. The overall risk of the company is assessed to be higher with
the increasing business and financial risk of the company in the form of increasing debt of the
company. The Credit Rating Agency company expects that the Debt/EBITDA for the company
to be around 5.0x-6.0x for the company in the next 12-18 months.
However, the company is also having various other senior notes, which were reported by
the company in financial report of the company. On February 27 2017, the company sold various
senior notes in a private placement to certain instructional investors (Vogel, 2014).

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Figure 1: Senior Notes of Steris Corporation
(Source: Annual Report 2018.)
Share Price Analysis
The share price analysis for the Sterris Corporation was done by including the share price
movement of the company in the trend period of five years and the relevant analysis was done
based on the same. The Share price of the company has shown an increasing growth trend in the
five-year trend period from the year 2014-2019. The return for the company in the trend period
was around 22.39% in this five-year period (Majanga, 2015). The share price volatility could
also be assessed with the help of the standard deviation of the company that was around 23.60%
for the company. The return and risk of the company will be affected due to many conditions and
factors that may in significantly affect the operations and financial performance of the company.
The business risk and the financial risk of the company has been high for the company with the
increasing financial risk for the company in the form of increasing debt of the company has been
the key reason for high volatility in the share price movement of the company (Vijitha &

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Nimalathasan, 2014). The company is also having high concentration risk in the form of product
portfolio diversification is less and the changing business scenarios, general macro, and legal
conditions directly influences the workings of company. The monthly standard deviation for the
company was around 5.57% for the company. However, it is crucial to note that there are several
other factors that the investors needs to analyse for the inspection of the share price movement
and the factors behind the movement of the same.
Figure 2: Share Price Performance of Steris Corporation
(Source: Sterris Corporation Share Price, 2019)
Conclusion
The financial analysis of the Sterris Corporation was done by including the analysis of
the debt of the company and various other financial data of the company. The share price of the
company has been volatile for the company in the trend period analysed for the company. The
company is having a substantial long-term bond borrowing for the company where the ratings of
the company has been volatile for the company. The increase of the debt in the overall capital
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Share Price Movement
Steris Corporation

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structure of the company has been key reason why the company overall financial risk was
assessed to be high for the company. The growth trend showed by the company in the form of
rising share price of the company has been due to the optimal growth scenarios and opportunities
seen by the investors of the company. On a risk return basis the company has shown optimal
higher risk on a per unit of return generated by the company.
Figure 3: Share Price Performance of Steris Corporation
(Source: Sterris Corporation Share Price, 2019)

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Reference
Annual Report 2018. (2018). Retrieved from
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_STE_2018.pdf
Majanga, B. (2015). The dividend effect on stock price-an empirical analysis of Malawi listed
companies. Accounting and Finance Research, 4(3).
Nikolov, B., Schmid, L., & Steri, R. (2018). The Sources of Financing Constraints. Available at
SSRN 3293849.
Roberts, K. A., Hahn, C. W., Kern, G. P., Hoitink, R. A., Crowder, R. O., & Burban, J. H.
(2014). U.S. Patent No. 8,920,715. Washington, DC: U.S. Patent and Trademark Office.
Sterris Corporation Share Price. (2019). Retrieved from
https://in.finance.yahoo.com/quote/STE/history?p=STE
Vijitha, P., & Nimalathasan, B. (2014). Value relevance of accounting information and share
price: A study of listed manufacturing companies in Sri Lanka. Merit Research Journal
of Business and Management, 2(1), 1-6.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.

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Appendix
1) Moody’s Review

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2) Earlier Review by Moody’s Rating Company