Quote:
Originally Posted by twelve yr old
Anyone taken a look at SRCL? There's lawsuit news today about pricing fraud, which doesn't seem like the mark of a healthy business. The chart for the past year and a half looks like a death spiral
Ok, I've spent a few hours researching them and their future doesn't look good.
1. Most of their customers are small private practice doctors who need a medical waste disposal service and are forced into using Stericycle by way of no other options. In turn they are forced to pay their monopoly pricing (look it up, there are no competitors). Below is found in a company presentation from 2015
-Small account customers generate gross margins higher
than large account customers
-Small account customers are more likely to outsource
and are easier to up-sell
2. Small private practices are being gobbled up by hospitals and larger medical organizations due to managed care screwing them over. So they go join a larger organization who can bargain on their behalf. This trend isn't going to change, more likely to accelerate.
3. So now Stericycle is going to have to bargain with hospitals and larger medical organizations. Unlike, small private practices, these larger organizations aren't at the mercy of Stericycle. They can bargain for lower rates, or if they feel it makes more economic sense, purchase a medical waste incinerator and completely cut them out.
4. They purchased Shred-It (paper shredding company) for $2.3 billion in 2015. This purchase was supposed to complement their medical waste business, but it seems like a highly competitive marketplace with low barriers to entry, while taking on a lot of debt.
5. Lastly, there's been 0 insider buys as far back as I can go (2015). The stock has fallen more than 50% from its October 2015 high. This should raise some red flags.
Let me know if you guys think this makes as much sense to you as it does to me.
-One more thing to add on. They've been on an acquisition spree buying up local medical waste companies and jacking up the prices 300-400%. I feel like I've heard this story somewhere else.
Last edited by twelve yr old; 02-04-2017 at 01:45 AM.