Thermo Fisher Scientific Stock To $398?
Thermo Fisher Scientific (TMO) stock has jumped 21% during the past month, and is currently trading at $567.20. Our machine-driven multi-factor assessment suggests that it may be time to sell TMO stock. We have, overall, a pessimistic view of the stock, and a price of $398 may not be out of reach. We believe there is a near-equal mix of good and bad in TMO stock given its overall Moderate operating performance and financial condition. But keeping in mind its High valuation, we think that the stock is Unattractive.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | High |
| What you get: | |
| Growth | Weak |
| Profitability | Moderate |
| Financial Stability | Strong |
| Downturn Resilience | Moderate |
| Operating Performance | Moderate |
| Stock Opinion | Unattractive |
TMO stock has jumped meaningfully recently and we currently find it unattractive. This may feel like a caution, and there is significant risk in relying on a single stock. However, there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Separately, consider what could long-term performance for your portfolio be if you combined 10% commodities, 10% gold, and 2% crypto with equities.
Let’s get into details of each of the assessed factors but before that, for quick background: With $214 Bil in market cap, Thermo Fisher Scientific provides life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products worldwide, including reagents, immunodiagnostic kits, and laboratory refrigerators and freezers.
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[1] Valuation Looks High
| TMO | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 5.0 | 3.3 |
| Price-to-Earnings Ratio | 32.7 | 24.5 |
| Price-to-Free Cash Flow Ratio | 34.8 | 21.2 |
This table highlights how TMO is valued vs broader market. For more details see: TMO Valuation Ratios
[2] Growth Is Weak
- Thermo Fisher Scientific has seen its top line grow at an average rate of 0.3% over the last 3 years
- Its revenues have grown 2.0% from $42 Bil to $43 Bil in the last 12 months
- Also, its quarterly revenues grew 3.0% to $11 Bil in the most recent quarter from $11 Bil a year ago.
| TMO | S&P 500 | |
|---|---|---|
| 3-Year Average | 0.3% | 5.4% |
| Latest Twelve Months* | 2.0% | 5.2% |
| Most Recent Quarter (YoY)* | 3.0% | 6.1% |
This table highlights how TMO is growing vs broader market. For more details see: TMO Revenue Comparison
[3] Profitability Appears Moderate
- TMO last 12 month operating income was $7.9 Bil representing operating margin of 18.2%
- With cash flow margin of 17.5%, it generated nearly $7.6 Bil in operating cash flow over this period
- For the same period, TMO generated nearly $6.6 Bil in net income, suggesting net margin of about 15.2%
| TMO | S&P 500 | |
|---|---|---|
| Current Operating Margin | 18.2% | 18.6% |
| Current OCF Margin | 17.5% | 20.4% |
| Current Net Income Margin | 15.2% | 12.7% |
This table highlights how TMO profitability vs broader market. For more details see: TMO Operating Income Comparison
[4] Financial Stability Looks Strong
- TMO Debt was $35 Bil at the end of the most recent quarter, while its current Market Cap is $214 Bil. This implies Debt-to-Equity Ratio of 16.4%
- TMO Cash (including cash equivalents) makes up $6.4 Bil of $101 Bil in total Assets. This yields a Cash-to-Assets Ratio of 6.3%
| TMO | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 16.4% | 21.1% |
| Current Cash-to-Assets Ratio | 6.3% | 7.0% |
[5] Downturn Resilience Is Moderate
TMO saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- TMO stock fell 35.3% from a high of $667.24 on 31 December 2021 to $431.41 on 27 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $624.21 on 10 September 2024 , and currently trades at $567.20
| TMO | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -35.3% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
2020 Covid Pandemic
- TMO stock fell 24.9% from a high of $340.05 on 22 January 2020 to $255.30 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 27 April 2020
| TMO | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -24.9% | -33.9% |
| Time to Full Recovery | 35 days | 148 days |
2008 Global Financial Crisis
- TMO stock fell 53.9% from a high of $62.70 on 15 August 2008 to $28.90 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 18 May 2011
| TMO | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -53.9% | -56.8% |
| Time to Full Recovery | 909 days | 1480 days |
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.