STERIS plc (STE) Cash Flow Statement

The persistent OCF/NI ratio above 1.5, even in the 2024Q4 loss quarter, suggests that non-cash charges like D&A are substantial and that working capital is not a major drag. The 2026Q1 spike to 2.37 likely reflects favorable working capital movements, but the sustained premium over net income indicates robust cash generation relative to reported earnings. Investors should monitor whether this gap narrows as growth normalizes.

The upward trend in FCF margin, despite quarterly swings, aligns with the revenue acceleration and margin expansion noted in the income statement analysis. The 2027Q1 FCF of $279.6M is the highest in the period, supported by strong operating cash flow and controlled capex. However, the 2025Q2 dip to 11.2% shows that FCF can be lumpy, likely due to working capital timing, so investors should focus on the trailing twelve-month trend rather than any single quarter.

The declining capex/revenue ratio, from a peak of 8.4% to 5.9%, indicates that STERIS is generating more revenue per dollar of capital investment, which may reflect a mix shift toward services and consumables. This trend supports higher FCF margins and suggests that maintenance capex is not escalating proportionally with growth. However, the absolute capex remains stable around $90M per quarter, so the decline is revenue-driven, not a cut in investment.

The large positive working capital change in 2026Q4 ($145.9M) and 2026Q1 ($96.2M) boosted OCF, while negative changes in 2026Q2 and 2026Q3 dampened it. This pattern suggests that STERIS's cash flow is sensitive to timing of collections and payables, which is typical for a company with a large service and consumables business. The 2027Q1 positive change of $17.7M is modest, indicating a normalization. Investors should not extrapolate quarterly OCF without adjusting for these swings.

The steady dividend, growing from $51.4M to $61.4M per quarter, reflects a commitment to shareholder returns, while buybacks have been opportunistic, with a notable $115.5M in 2027Q1. The acquisition activity is modest, with net cash outflows mostly under $35M, except for a $795.9M inflow in 2025Q1, which likely represents a divestiture or milestone payment. This balanced deployment suggests management is returning cash to shareholders while maintaining flexibility for tuck-in acquisitions.

The cumulative OCF/NI ratio of approximately 1.94 underscores that STERIS's earnings are backed by substantial cash generation, largely due to D&A and favorable working capital. This divergence is a positive signal for earnings quality, but it also implies that a significant portion of cash flow is being reinvested or returned to shareholders. The gap may narrow if D&A growth slows or working capital turns negative, so investors should monitor the sustainability of this trend.