NEW YORK (TheStreet) -- If you don't buy in advance of a breakout, you buy the breakout. If you don't buy the breakout, then you buy the first pullback. That's what we are looking to do in Steris PLC (STE - Get Report) .
This short-term chart of STE, above, shows that most of the trading in STE the past 12 months has been around the $65 level with $71 capping the upside. STE just broke out over $71. With the slope of the 50-day and 200-day moving averages now positive and the Moving Average Convergence Divergence (MACD) oscillator rising and above zero, we want to go long STE. Prices are extended so waiting for a pullback makes sense.
This longer look at STE above supports the bullish story. STE based around $30 in 2011-2012. Prices often move in multiples from a base level -- a double would be $60 and a triple would be $90. With the breakout over $71, our upside target for STE becomes $90. We would look to buy STE in the $74-$72 area, risking below $70 with a $90 price objective.
TheStreet Ratings team rates STERIS CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate STERIS CORP (STE) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 37.8%. Since the same quarter one year prior, revenues slightly increased by 5.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- STE's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that STE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.80 is high and demonstrates strong liquidity.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- STERIS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STERIS CORP increased its bottom line by earning $2.25 versus $2.17 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $2.25).
- 47.58% is the gross profit margin for STERIS CORP which we consider to be strong. Regardless of STE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.77% trails the industry average.
- You can view the full analysis from the report here: STE