STE
STERIS plc
$217.05
Platform & Compounding FCF
65%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 15.8% above fair value
You pay
$217.05
Bear
$141.39
Fair
$187.41
Bull
$230.89
Bear
$141.39
-34.9%
5% stage 1 growth, 11% discount
Fair
$187.41
-13.7%
9% stage 1 growth, 11% discount
Bull
$230.89
+6.4%
11% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (9% base case)
Terminal Value % of EV
38%
Implied Market Multiple
24.6x
Market is pricing in (growth)
11.8%
vs 8.5% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $269.50 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $187.41 per share.
Warnings
Wall Street's average price target is $269.50 (from 13 analysts). Our estimate is 38% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions