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STERIS plc (STE) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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STERIS plc (STE)

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Intrinsic Value (DCF)

Current$268.26
→
Intrinsic$173.69
-35%
$111.97$173.69$290.93
Market implies 26% growth for 5 years
Current price reflects execution expectations above 16% growth — not unreasonable for quality businesses.
At $268, the market prices in continued strong cash flow growth (26%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $112 → Bull $291. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →12%14%16%18%
8%$214$234$256$279
10%$145$159$174$189
12%$107$117$128$140
14%$83$91$100$109

Bull Case

  • Bull case ($291) offers 8% upside at 19% growth, 9% discount

Bear Case

  • Bear case ($112) implies 58% downside at 13% growth, 12% discount
  • Price reflects 26% growth expectations vs 16% historical — high bar to clear
  • Trading 35% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$899.76M
Year 2$1.04B
Year 3$1.20B
Year 4$1.39B
Year 5$1.61B
Terminal$23.68B

📐 Model Inputs

Growth Rate15.7%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$778.00MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is STE stock undervalued or overvalued?
🔴 OVERVALUED

STE trades at $268.26 vs. our DCF-derived intrinsic value of $173.69, implying -33% downside. Using a 10.0% WACC and 15.7% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($262.70) suggests limited upside.

What is STE's intrinsic value?

Using a 5-year DCF model: Base FCF of $778M, projected at 15.7% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $2.03B net debt and dividing by 0.10B shares: Bear $111.30 | Base $173.69 | Bull $262.70. Current price $268.26 implies -33% to base case.

How is STE's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 15.7% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($19.24B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 24.7x.