The problems don't seem to end for waste disposal company Stericycle (SRCL) - Get Report .

Shares of the Lake Forest, Ill.-based company, which disposes of regulated waste, including medical and hazardous materials, have plunged almost 30% over the past year on the back of repeated earnings misses and delays in realizing cost savings from acquisitions.

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As the only medical waste incineration facility in the West, the company has also drawn fire for causing pollution.

With so many problems plaguing Stericycle, should investors risk exposure to this stock, or are there better opportunities for growth elsewhere?

Stericycle's first-quarter revenue was $874.2 million, up 31.8% from a year earlier. Normally, that kind of increase would be cause for celebration.

But for Stericycle, that encouraging figure was dampened by the earnings miss that it registered for the third quarter out of the past five due to weaker margins. Earnings were $1.11 a share, falling short of estimates by 4 cents.

Lower industrial hazardous waste revenue and a slower pace of synergies expected from the acquisition of document destruction company Shred-it hurt the bottom line.

The fact that the integration of Shred-It is taking a long time is surprising, particularly for a company that derived more than one-fifth of its latest quarter's revenue from acquisitions.

In addition, the strength of the dollar had a further negative impact on the waste management company's revenue. If it weren't for the impact of currency fluctuations, revenue would have actually risen 35.4%.

Still worse is that management doesn't expect the pain to end there.

As per Stericycle's updated guidance, this year's performance will be related to the "timing of the Shred-it synergies, softer industrial hazardous waste volume and higher costs associated with international operations."

The updated full-year earnings estimate range is $4.90 to $5.05 a share, down from $5.28 to $5.35 a share earlier. Revenue is now pegged at $3.6 billion to $3.66 billion versus $3.65 billion to $3.72 billion earlier.

Analysts have turned cautious and even pessimistic on Stericycle. There are considerably more profitable investment choices available to investors.

Stifel downgraded the stock last month to hold from buy and removed its price target of $145.

Raymond James also downgraded the stock to market perform from outperform.

RBC Capital has a more bearish outlook, downgrading the stock last month to underperform from sector perform and cutting its price target to $96 from $119.

Margin pressure and falling returns on capital could continue as Stericycle has diversified into less profitable and some volatile businesses to offset a sluggish US medical waste unit, according to RBC Capital's report.

Perhaps the only hope for investors lies in the delayed synergies that the Shred-it acquisition will bring.

About $20 million of synergies associated with the acquisition will be delayed to next year and 2018. This should bring the margins and profitability of the company under control.

RBC Capital also expects the company to overcome the challenges associated with industrial hazardous waste next year.

The currency headwinds affecting Stericycle may also subside considerably by the end of next year.

Nevertheless, instead of Stericycle, investors should consider stronger peers such as Republic Services and Waste Management. The two stocks are not only outperforming Stericycle but are also yielding at least 2.5% in dividends.

Both Republic Services and Waste Management are available at only slightly higher forward price-to-earnings ratios of 20.5 and 20.1, respectively, compared with Stericycle's 17.5.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.