• If you are wondering whether STERIS is attractively priced or asking too much at today's levels, the valuation picture is not as straightforward as a simple P/E ratio or quick chart glance might suggest.
• The stock recently closed at US$214.46, with returns of 0.9% over the last week, a 2.5% decline over 30 days, and a 14.2% decline year to date. This leaves the 1 year return at a 3.7% decline, and the longer-term 3 year and 5 year returns at 16.6% and 13.6% respectively.
• These mixed returns sit against a backdrop of ongoing interest in the medical equipment space and STERIS's role in healthcare services, which keeps the stock on the radar of many investors. Broader sector attention and periodic shifts in sentiment can help explain why the share price has not moved in a straight line over these periods.
• On Simply Wall St's 6 point valuation checklist, STERIS currently scores 2 out of 6. The rest of this article will break down what different valuation methods say about that score and point you to a more complete way of thinking about value at the end.

STERIS scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: STERIS Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes projected future cash flows and discounts them back to today to estimate what the business could be worth right now.

For STERIS, the latest twelve month Free Cash Flow (FCF) is about $870.9 million. Simply Wall St applies a 2 Stage Free Cash Flow to Equity model, using analyst estimates where available and then extending those forecasts. For example, FCF is projected at $800.01 million in 2025, with a set of annual projections out to 2035 where the discounted values range from about $877.3 million in 2026 to $682.0 million in 2035.

Pulling all those projected cash flows together, the model arrives at an estimated intrinsic value of about $251.92 per share. Compared with the recent share price of $214.46, this suggests STERIS trades at a 14.9% discount to that DCF estimate, and the stock screens as undervalued on this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests STERIS is undervalued by 14.9%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: STERIS Price vs Earnings

For a profitable company like STERIS, the P/E ratio is a practical way to gauge how much you are paying for each dollar of earnings. Investors tend to accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in the business.

STERIS currently trades on a P/E of 29.69x. That sits above the Medical Equipment industry average P/E of 23.87x and also above the peer average of 20.20x, which suggests the market is putting a higher price on STERIS earnings than on many industry peers.

Simply Wall St also calculates a proprietary “Fair Ratio” of 24.08x for STERIS. This metric is designed to be more tailored than a simple peer or sector comparison because it incorporates factors such as earnings growth expectations, profit margins, company size, industry characteristics and key risks. By folding these elements into a single figure, the Fair Ratio aims to show what a reasonable P/E could be for this specific company rather than for the group as a whole. On this basis, STERIS trading at 29.69x versus a Fair Ratio of 24.08x points to the stock being overvalued on the preferred multiple.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your STERIS Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced as a simple way for you to write the story behind your numbers by linking STERIS's business context to a concrete forecast for revenue, earnings and margins, turning that into a fair value, and then comparing it with the current share price. All of this can be done within the Narratives section on Simply Wall St's Community page, where views are updated automatically when new news or earnings arrive. This is why one investor might build a STERIS Narrative that lines up with the higher US$300 fair value while another might take a more cautious stance closer to US$231, even though both are working from the same starting data.

Do you think there's more to the story for STERIS? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.