YB new stock pitches (Wed, May 7)

STERIS plc, a medical sterilization leader, is poised for growth after several FY25 headwinds subside: 1) The Dental divestiture (6% sales, 5% profit hit) is now complete; 2) A $5M AST contract loss and $20M in EtO litigation costs won't recur; 3) A $25M healthcare restructuring will yield savings in FY26; 4) AST margins are improving as bioprocessing rebounds and hospital destocking ends; 5) Management acknowledges 'bloated' corporate costs and is working to trim them; and 6) EtO litigation risk has been reduced after a $48.2M settlement for Illinois claims, with recent favorable industry verdicts and potential EPA standard relaxation under Trump. Trading at 21.5x FY26E PE, slightly above its 19x historical average but below its recent 25x average, STE offers attractive potential for a low-teens compounder. The main risk is tariffs on Mexico and Canada, which represent ~10% of cost of goods, though operational efficiencies could offset some impact.

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Klaviyo (KVYO) faces significant downside risk as 78% of its ARR comes from the Shopify ecosystem, exposing it to severe tariff impacts and the closure of the de minimis loophole which allowed low-value imports to enter duty-free. Over 50% of Klaviyo's 167,000 SMB e-commerce customers are at risk of extinction by end-2025, with approximately one-third of 2024 revenue endangered. Customers like Busy Baby (launching a GoFundMe), Pashion Footwear (writing open letters to preserve the loophole), CUTS Clothing, and Helen of Troy (which suspended guidance and lost its CEO) are already struggling. Klaviyo's recent pricing changes in Q1 2025 won't offset the estimated 30%+ revenue at risk. Unlike Shopify, Klaviyo lacks diversified revenue streams while competing with multiple email providers including Shopify's own solution and Twilio SendGrid (ironically the infrastructure Klaviyo was built on). Sell-side analysts are cutting price targets as the Trump administration appears serious about maintaining these policy changes, signaling significant downside ahead.

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Civeo Corporation (CVEO), trading at a $260 million market cap with $105 million in net debt, provides lodging for remote workers primarily in Canadian oil sands and Australia. The company has dramatically reduced its debt from $400 million to $45 million since its 2014 spin-off from Oil States International while consistently generating $40-70 million+ in annual free cash flow. For the first time in company history, Civeo is pivoting from debt repayment to shareholder returns via buybacks (recently authorizing repurchase of 10% of outstanding shares), dividends, and M&A. Despite shares selling off with falling oil prices, most of Civeo's revenue and earnings come from Australian mining companies, not oil. With projected 2025 EBITDA of $100 million and management likely using $40 million FCF to repurchase 10% of shares, a 5-6x EBITDA multiple yields a $32-40 price target. Engine Capital is currently pushing for more buybacks and/or an outright sale of the company, though management has already demonstrated skill navigating difficult commodity environments.

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