Medical equipment and services company Steris (NYSE: STE). met Wall Street’s revenue expectations in Q1 CY2026, with sales up 7.3% year on year to $1.59 billion. Its non-GAAP profit of $2.83 per share was 0.7% below analysts’ consensus estimates.

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Company Overview

With a mission critical role in preventing healthcare-associated infections, STERIS (NYSE: STE) provides infection prevention products, sterilization services, and medical equipment that help healthcare facilities and life science companies maintain sterile environments.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, STERIS’s 13.8% annualized revenue growth over the last five years was solid. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. STERIS’s recent performance shows its demand has slowed as its annualized revenue growth of 7.5% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 6.8% year-on-year growth. Because this number aligns with its reported revenue growth, we can see that foreign exchange has not had a meaningful impact on topline.

This quarter, STERIS grew its revenue by 7.3% year on year, and its $1.59 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.1% over the next 12 months, similar to its two-year rate. Still, this projection is above average for the sector and indicates the market sees some success for its newer products and services.

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Adjusted Operating Margin

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

STERIS has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average adjusted operating margin of 23.2%.

Looking at the trend in its profitability, STERIS’s adjusted operating margin decreased by 1.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, STERIS generated an adjusted operating margin profit margin of 19.9%, down 4.9 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

STERIS’s EPS grew at a remarkable 10.6% compounded annual growth rate over the last five years. However, this performance was lower than its 13.8% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of STERIS’s earnings can give us a better understanding of its performance. As we mentioned earlier, STERIS’s adjusted operating margin declined by 1.3 percentage points over the last five years. Its share count also grew by 14.4%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q1, STERIS reported adjusted EPS of $2.83, up from $2.74 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects STERIS’s full-year EPS of $10.17 to grow 9%.

Key Takeaways from STERIS’s Q1 Results

It was good to see STERIS narrowly top analysts’ full-year EPS guidance expectations this quarter. On the other hand, its revenue was in line and its EPS fell a bit short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded up 4% to $209.88 immediately following the results.

Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).