Let's talk about the popular STERIS plc (NYSE:STE). The company's shares maintained its current share price over the past couple of month on the NYSE, with a relatively tight range of US$216 to US$233. However, does this price actually reflect the true value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at STERIS's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for STERIS

What's The Opportunity In STERIS?

According to my valuation model, the stock is currently overvalued by about 25%, trading at US$222 compared to my intrinsic value of $178.05. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that STERIS's share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will STERIS generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. STERIS' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in STE's positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe STE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping an eye on STE for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook is encouraging for STE, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing STERIS at this point in time. Case in point: We've spotted 3 warning signs for STERIS you should be aware of.

If you are no longer interested in STERIS, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.