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Headwinds for Stericycle but Shares Undervalued

The narrow-moat firm offers attractive upside potential for value investors who can handle volatility.

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Matthew Young: Medical waste management industry leader Stericycle has encountered several headwinds over the past few years that have weighed heavily on operating performance and investor sentiment.

For one, the firm is navigating a painful customer-pricing reset phase. In short, consolidation of independent healthcare practices into larger hospital groups with greater bargaining power is driving material pricing concessions. Additionally, the firm has grappled with distractions from a customer class action lawsuit that settled last year, two uncharacteristically large, complicated acquisitions, and to top it off, it's in the midst of a multiyear turnaround program that will cloud near-term margins.

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Matthew Young does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.