The stock of Thermo Fisher Scientific (NYSE:TMO, 30-year Financials) is estimated to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $468.45 per share and the market cap of $184.1 billion, Thermo Fisher Scientific stock appears to be fairly valued. GF Value for Thermo Fisher Scientific is shown in the chart below.
Because Thermo Fisher Scientific is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 15.4% over the past three years and is estimated to grow 7.87% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Thermo Fisher Scientific has a cash-to-debt ratio of 0.30, which which ranks worse than 84% of the companies in the industry of Medical Diagnostics & Research. The overall financial strength of Thermo Fisher Scientific is 6 out of 10, which indicates that the financial strength of Thermo Fisher Scientific is fair. This is the debt and cash of Thermo Fisher Scientific over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Thermo Fisher Scientific has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $35.9 billion and earnings of $19.86 a share. Its operating margin is 27.89%, which ranks better than 87% of the companies in the industry of Medical Diagnostics & Research. Overall, the profitability of Thermo Fisher Scientific is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Thermo Fisher Scientific over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Thermo Fisher Scientific is 15.4%, which ranks better than 68% of the companies in the industry of Medical Diagnostics & Research. The 3-year average EBITDA growth is 25.9%, which ranks better than 69% of the companies in the industry of Medical Diagnostics & Research.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Thermo Fisher Scientific's ROIC was 16.22, while its WACC came in at 5.26. The historical ROIC vs WACC comparison of Thermo Fisher Scientific is shown below:
In conclusion, The stock of Thermo Fisher Scientific (NYSE:TMO, 30-year Financials) appears to be fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 69% of the companies in the industry of Medical Diagnostics & Research. To learn more about Thermo Fisher Scientific stock, you can check out its 30-year Financials here.
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