Detailed Financial Analysis Report: Steris Corporation (Finance)

This report provides a comprehensive financial analysis of Steris Corporation, examining its financial health through key metrics such as liquidity ratios (current and quick ratios) and debt-to-equity ratios. The analysis includes an evaluation of Steris's stock performance, including its five-year trend, volatility, and risk factors. The report delves into the company's annual reports, assessing its capital structure, debt levels, and return on stock. It also identifies and discusses business and financial risks, including operational costs, profit margins, and market volatility, along with an analysis of the company's beta. The report concludes with an investor perspective, evaluating Steris's financial performance, growth potential, and overall investment viability based on the analyzed financial data and market trends. The report also mentions the company's credit rating and its impact on financial risk and stock price volatility.

Running Head: RESEARCH SUMMARY 1
steris
Research Summary
3/14/2019

RESEARCH SUMMARY 2
Background
The research completely focuses on analyzing the financial health of the company in terms of its
liquidity ratio, current ratio, and leverage or debt-equity ratio. Steris is established as a leading
pharmaceutical company in the healthcare sector. The company is providing medical services for
infection prevention and procedural services. Basically it deals in products and services related to
life sciences.
Financial Health
Liquidity ratios reflect the company’s ability to pay off its liabilities i.e. the amount of cash,
assets turning into cash, for paying both short and long term liabilities. At the same time current
ratio is the ability of the company to pay off its short term liabilities through its current assets. It
is the ratio of current assets to current liabilities. If this ratio would be greater than 1 it means
that the company is financially healthy to clear-off its short term debts. However, a big factor in
analyzing the current ratio is the quality and composition of current assets. The next indicator is
the debt-to-equity ratio. A higher ratio is preferable for the organizations with higher growth rate
to stabilize its business.
Stock Exchange Health
Since the company has registered long term debts in its account books, its current share price is
fixed at US$ 122.38. This is quite surprising as the credit rating of the company hasn’t changed
since 2011. This caused the credit rating company, Moody, to give negative reviews about the
company as it caused Steris to raise additional debts. But despite the company ratings remained
unchanged. Since the company is into processing of variety of medical isotopes that have very
few buyers in the market, the business risk of the company is high. Since the additional debt is

RESEARCH SUMMARY 3
for the financial leverage of the company the overall risk to the company is high. The five year
trend of the company shows an increasing pattern in the share price. However, this growth is
highly volatile due to the high standard deviation of 23.60%. The risk of being too concentrated
on a specific product portfolio increased this volatility. Overall per unit of return there is
comparatively higher risk exhibited by the company.
Annual Report
It is a market mandate that the equity of the company decides that how much capital the
company will procure. Comparatively the debt component of the company should be lower than
the equity that will ensure that the company is less dependent on the external borrowing and
therefore has lower leverage component and the major capital structure would be through
company’s equity investments. Other than debt to equity ratio is debt to asset ratio that evaluates
the total assets bought through borrowed amount which is inherently presented as debt in the
balance sheet. It is reported that the companies which are highly leveraged through externally
borrowed money put themselves under insolvency risk or bankruptcy risk. In the analysis of
return on stocks it becomes critical for the investor to plan on diverse investing strategies. Before
taking the decision on investment the investor must be satisfied on the returns of the stock. This
part of research is highly informative and interesting.
Risk & Beta Analysis
Till now two types of risks have been identified in the company – business risk and financial
risk. Other than increasing cost of operation and declining profit margins, there are legal,
economic, and technological risks associated with the operations of the company. The rising
interest rates, inflation level, and varying micro economic policies are some other factors.

RESEARCH SUMMARY 4
Research and development costs are also required to be incurred that indirectly links with the
financial risks involved with the company.
Beta of the company reflects the fluctuation rate in the stocks of company with respect to the
market returns. The stock volatility can be checked in terms of market. The general value of
market beta is considered as 1 and then the individual stock will be ranked to evaluate the degree
of its fluctuation from the market. The sector in which the company operates may be a reason for
the stock volatility in market.
Become an Investor?
There has reportedly been a high growth in the overall revenue of the company. This profitability
can be owed to the minimum debt exposure of the company as per the industry average. The
financial risk was also low. The current asset was also significant to the current liabilities. A
positive growth can be expected for the revenue in the upcoming years along with the associated
risks. In complexities of profit and risks and analyzing global conditions as well as macro-
economic environment it can be decided that company’s financial performance will further
improve.
The other signs of financial health of the company include debt to equity ratio that is constantly
in reducing mode from 2015-2018. This made the company improve its position in its financial
ranking. This indicates that the equity position of the company has improved over the years. The
company’s stocks have been in fluctuating position in last five years but experienced a high
stock value and positive returns of 29.89% over the years. Hence it is a good company to invest
into provided it yields positive returns.

RESEARCH SUMMARY 5
The credit rating of the company remained unchanged till 2019 over the last five years that
remain unaffected with additional debt it borrowed from the company. However, the financial
risk due to the high standard deviation from around the market price. This added on to the overall
risk to the financials of the company as it increased the volatility of the share price.
Since the current ratio of Steris Corporation has always ranged between 2 to 3 over the last five
years and has not changed much the company is considered to be in a good financial position and
is able to wave off its short term dues comfortably over the years. Since the Quick ratio of the
company has always remained between 1.8 and 2.1 the company is said to hold a strong financial
position in the market and capable of converting its assets quickly into cash for clearing out its
short term dues. The company has consistently followed a reducing trend of debt to equity ratio
from 2014 to 2018 that improved its position in the market to a high level. Hence it would be
good to invest in the company as per the trend it shows in the last two years expecting fair
returns on investment.