What happened

After the company spent the previous couple years in the doldrums, a turnaround strategy helped spark a 73.9% rally in Stericycle's (NASDAQ:SRCL) shares in 2019, according to S&P Global Market Intelligence.

So what

An increasingly competitive market for disposing of regulated waste and destroying secure information had been crimping Stericycle's performance, so management has instituted a restructuring that includes cost-savings initiatives and the sale of noncore assets to boost profitability.

A man sitting at a table looks through a pair of binoculars.

IMAGE SOURCE: GETTY IMAGES.

The efforts remain underway, but their are signs that the turnaround is taking hold. In Q3, 2019, the company reported 6.1% and 1.6% organic sales growth in its secure information destruction and regulated waste segments, respectively, despite total companywide revenue slipping 2.6% to $833 million. Stericycle also reported adjusted EBITDA that outpaced its previous two quarters, and thanks to stronger cash flows, it paid off $83 million in debt -- its biggest debt reduction since Q3 2017. After adjusting for one-time events, earnings per share totaled $0.80 in the quarter, $0.12 better than industry watchers anticipated.

The quarterly performance allowed Stericycle to bump up the low end of its full-year adjusted earnings-per-share forecast by $0.05 to $2.55.

Now what

The company continues to sell noncore assets, and that remains a headwind to revenue growth. However, the asset sales should position Stericycle for improved ongoing earnings upside and, eventually, a return to top-line growth given recent improvements in core business revenue.

Nevertheless, the company's shares are trading at the higher end of their five-year range on both forward price-to-sales and forward price-to-earnings ratios, suggesting investors might need to see additional strengthening in its business to justify its valuation following its dramatic run-up last year.