Narrow-Moat Steris Ends Fiscal 2020 With Notable Resilience to Ongoing Pandemic

Narrow-moat Steris had an impressive finish to fiscal 2020, exceeding our expectations on revenue and profits, and beating market consensus EPS compiled by Capital IQ. We had previously reduced our fair value estimate in light of the ongoing pandemic, and we are maintaining our current fair value estimate at $165 per share. We plan to review our model assumptions in detail once we get further clarity on COVID-19 impact over the next quarter. If Steris can maintain momentum into fiscal 2021, we anticipate an increase to our fair value estimate, though we expect any valuation changes to be in the low- to mid-single-digit range. After a near 40% plunge in the share price in late March, the market has come around to our view that Steris’ long-term outlook is relatively unaffected by the pandemic, and shares have traded upward and are now fairly valued, in our opinion, after trading below intrinsic value for much of the past two months.