Stericycle (SRCL)

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Bulls: Reasons To Buy Feeling Bullish? Be the first to explain why this would make a good investment See all Bears Reasons Bears: Reasons To Sell Slow Economy, pressure on procedure volume, less medical waster. 0% agree Slow Economy, pressure on procedure volume, less medical waster. see headlin View or Edit Reason 0 votes 0% agree Send the authors a comment or suggestion why have Small quantity generators increase so rapidly [Dismiss] [Done] See All Suggestions

Top Contributors Kryssia Uraguchi Related Articles Waste Management (WMI) Aging Baby Boomers Microtek Medical Holdings (MTMD) Ecolab (ECL) American Ecology (ECOL)

Stericycle stands to benefit from an aging U.S. population. As the second half of the baby boomer population continues to age, it is likely that their need for medical services, and thus their propensity to generate medical waste will continue to increase.

[edit] Business Financials

Stericycle has two types of clients: Large Quantity Generators (LQGs) and Small Quantity Generators (SQGs). LQGs include hospitals, distributors, and pharmaceutical companies, and SQGs include doctors' offices and retail pharmacies. Stericycle provides its clients with its patented Bio Systems and SteriSafe services. Bio Systems aids LQGs in the disposal of needles and syringes. SQGs use SteriSafe to dispose of RMW (radioactive mixed wastes). Both services help their clients maintain a safer workplace and comply with OSHA (Occupational Safety and Health Administration) regulations.

Stericycle has been highly successful over the past five years due to high margins and a growing customer base. The graphs illustrate that revenue has nearly doubled since 2003 with the immense increase in (SQGs).

^[1]

^[2]

[edit] Key Trends and Forces

• More Stringent Government Regulations Government regulations around waste disposal can be both boon and bane of companies like Stericycle. When regulations at aimed at Stericylce they can cost the company both time and money. On the other hand, stricter regulations around the way medical waste has to be disposed can also lead to greater demand for Stericycle's services. The company, for instance, has seen an increase in enrollment for its Bio Systems and SteriSafe programs because they comply with OSHA (Occupational Safety and Health Administration) regulations and increase employee safety by reducing the risk of injury (i.e. needle pricks or exposure to hazardous medical waste). Meanwhile the Sterisafe program has experienced a 10,000 SQG enrollment increase since 2005.

• High Barriers to Entry prevent new players front entering and competing with Stericycle in the medical waste market. Stericycle has built an expansive network of hospitals, outpatient centers, and other small medical facilities and has a 95% customer retention rate.

• Aging U.S. Population: The increase of the aging U.S. population is directly linked with the increase in SQG customers. The elderly are typically in need greater amounts of medical care (e.g. tests and medications), which generates more medical waste. Stericycle operates on a 55% margin for SQGs, which generated almost half of revenue in 2006.

[edit] Competition

Stericycle is the 800 pound guerrilla of the global medical waste market. It has 5 times the revenue of its nearest direct competitor. Stericycle (SRCL) is the largest medical waste company with 7% of the global medical waste market. ($790 MM in revenue (2006)).

• Waste Management (WMI) is the largest solid waste company with $13.3 billion in revenue (2006)^[3]. WMI doesn't directly compete with SRCL in the medical waste market, but WMI has mentioned possible plans to branch into that business. Currently, SRCL provides WMI with waste, so it is unlikely that WMI will want to compete with SRCL.
• American Ecology (ECOL) specializes in the collection and disposal of industrial, hazardous, and low-level radioactive wastes. ($116.8 MM in revenue (2006)^[4])
• Microtek Medical Holdings (MTMD) was recently acquired by Ecolab (ECL) and mainly sells medical equipment and infection-control drapes for operating rooms. ($141MM

in revenue (2006)^[5])

[edit] Notes

1. ↑ from 2007 Annual Report (under Item 6: Selected Consolidated Financial Data, page 22)
2. ↑ data from Stericycle annual reports
3. ↑ from 2006 Annual Report (under Item 6: Selected Financial Data, page 56)
4. ↑ from 2006 Annual Report (under Item 6: Selected Financial Data, page 26)
5. ↑ from 2006 Annual Report (under Item 6: Consolidated Statement of Income, page 27)