Do You Think Stericycle (SRCL) is Underearning its Potential?
Heartland Advisors, an investment management company, released its “Heartland Mid Cap Value Fund” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the portfolio returned 4.78% compared to a 3.86% gain for the Russell Midcap Value Index. Stock selection mainly in the Technology, Consumer Discretionary, and Utilities sectors led the fund to outperform in the quarter. The fund’s consistent performance was due to the positive stock selection in seven of the eleven sectors. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Heartland Mid Cap Value Fund highlighted stocks like Stericycle, Inc. (NASDAQ:SRCL) in the second quarter 2023 investor letter. Headquartered in Bannockburn, Illinois, Stericycle, Inc. (NASDAQ:SRCL) provides waste management services. On July 12, 2023, Stericycle, Inc. (NASDAQ:SRCL) stock closed at $46.68 per share. One-month return of Stericycle, Inc. (NASDAQ:SRCL) was -1.06%, and its shares gained 7.91% of their value over the last 52 weeks. Stericycle, Inc. (NASDAQ:SRCL) has a market capitalization of $4.379 billion.
Heartland Mid Cap Value Fund made the following comment about Stericycle, Inc. (NASDAQ:SRCL) in its second quarter 2023 investor letter:
"Industrials. Stericycle, Inc. (NASDAQ:SRCL) is the largest medical waste disposal and compliance company in the U.S. Over the past few years, the company has transformed itself from an aggressive, acquisition-driven company to one focused on organic growth, integrating core assets, reducing debt, and expanding profit margins. Toward that end, the company has undertaken several self-help strategies. This includes divesting non-core operations in order to focus on its core businesses of medical waste disposal and document destruction in the U.S. and Europe. Today, SRCL is largely complete with this portfolio reshaping and has successfully reduced debt to target levels. The critical action items left for the company pertain to integrating technology systems and demonstrating further progress in operational execution. In summary, SRCL is morphing from a ”holding company” into an “operating company”, with the latter offering far better prospects of rewarding shareholders.
Candidly, this is not our first time owning SRCL. The first time around, we became shareholders far too early in the company’s turnaround efforts and exited the position. However, we continue to monitor the progress made under a much-improved management team and expect a better outcome for shareholders going forward. Regulated waste companies with leading market shares and secular growth, like SRCL, trade at far more expensive multiples of EBITDA and free cash flow. Additionally, the company is significantly underearning its potential. As this dynamic changes, we can envision a virtuous circle where the company earns progressively higher trading multiples on higher earnings power."
Olaf Speier/Shutterstock.com
Stericycle, Inc. (NASDAQ:SRCL) is not on our 30 Most Popular Stocks Among Hedge Funds list. As per our database, 28 hedge fund portfolios held Stericycle, Inc. (NASDAQ:SRCL) at the end of first quarter which was 21 in the previous quarter.
We discussed Stericycle, Inc. (NASDAQ:SRCL) in another article and shared Ariel Appreciation Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
Disclosure: None. This article is originally published at Insider Monkey.
