Re: Steris
I won't buy it. Why? As I was leaving the OR today I took some time to look around. Yes, I washed my hands with Steris soap. Yes, the equipment is here.
But there's something else. A little flier on a board that I rarely stop to read. Listing all the trials that they are doing with different products. Trying to switch suture brands. Glove brands. Soap brands. Even different equipment brands. And at the end of each entry was something to the effect of "We will save $xx,xxx per year if we switch." They are willing to switch this or that to save literally $30,000/year. In an enterprise that does $300M/year. I learned different types of suture by their brand names. When I want a 4-0 Vicryl, it was like I didn't even know that was a brand name. It was just what it was. Now it's going to be something else. I can't remember the name.
Brand names carry no power in this environment. And hence IMO ROE that even for ten years or longer has been stable is now in danger if it belongs to a medical supply or equipment company. Really, no one is going to cry when the Steris soap in the bathroom is changed to something else. And the cost-cutting will hit the bathroom.
Over time, it will play out this way. And instead of fancy dinners persuading physicians and hospital admin to buy this or that, it will be the bottom line. I think this is coming to a head now (not that the pressure will subside) in the medical equipment/supplies arena, and disasters will occur in big names.
With Steris you are buying a name and a brand. And products. But if the products can be duplicated by a no-name, this is going to become a hard road. It appears undervalued by current numbers. But remember how much of the stock value is carried in that post-10 year residual value? Well, that is part that is very shaky.
Mike
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