Trying to Decide What to Do With Thermo Fisher Scientific Stock?
Let’s talk about where Thermo Fisher Scientific sits right now, especially if you’ve been weighing whether to buy, hold, or step back for a while. The stock price is fresh off some interesting moves. After dropping over 18% in the last year, TMO has posted a strong comeback in recent weeks, gaining nearly 24% over the past three months and 22% in the last 30 days. Even just in the last week, shares ticked up by over 2%. Clearly, market sentiment is changing, and investors are either warming up to the company’s value or re-evaluating earlier risks.
On the business front, Thermo Fisher posted healthy annual revenue and net income growth, which tends to support upward momentum in the stock. That said, broader biotech and diagnostics stocks have faced volatility on everything from regulatory headlines to evolving demand in research and clinical markets. Still, TMO’s steady cash generation is worth keeping in mind as you evaluate its staying power.
If you’re the kind of investor who likes a quantifiable scorecard, TMO’s current valuation score comes in at 4 out of 6. A company gets a point for each of six undervaluation checks it passes. That’s not perfect, but it does put Thermo Fisher in a category worth a closer look, especially since the stock is trading at a roughly 25.8% discount to its estimated fair value.
Let’s break down those valuation methods one by one, and why analysts use them. And just a hint: at the end, I’ll share an even more effective angle for putting all these numbers in context.
Thermo Fisher Scientific delivered -18.6% returns over the last year. See how this stacks up to the rest of the Life Sciences industry.Approach 1: Thermo Fisher Scientific Cash Flows
The Discounted Cash Flow (DCF) model estimates a company's true value by projecting its future cash flows and then translating those back into today’s dollars using a discount rate. This helps investors determine what a stock ought to be worth based on its ability to generate cash in the years to come.
For Thermo Fisher Scientific, the latest twelve months’ free cash flow stands at $6.0 billion. Analyst projections show robust growth in the years ahead, with expected annual free cash flows climbing to $15.2 billion by 2035. These forecasts demonstrate a strong trajectory and signal underlying operational strength.
Using these assumptions and a two-stage free cash flow to equity model, analysts estimate the fair value of TMO stock at $667 per share. At today’s price, this suggests that Thermo Fisher Scientific is trading at roughly 25.8% undervalued compared to its projected intrinsic value.
In summary, this valuation approach highlights a meaningful gap between the company’s fundamentals and the current price, indicating potential opportunity for investors who rely on cash flow outlooks.
Result: UNDERVALUEDApproach 2: Thermo Fisher Scientific Price vs Earnings
The price-to-earnings (PE) ratio is one of the most widely used tools for valuing profitable companies because it connects a company’s current share price with its annual earnings. Investors often rely on this metric to gauge how much they are paying for each dollar of profit. High-growth companies or those with lower perceived risks typically trade at higher PE multiples. In contrast, slower growers with more uncertainty are often valued at lower multiples. Essentially, expectations for future growth and risk profile play a big role in what PE ratio is considered “normal.”
Currently, Thermo Fisher Scientific trades at a PE ratio of 28.4x. For comparison, the average PE in the Life Sciences industry stands at 29.0x, and the peer group is even higher at 33.1x. Simply Wall St’s proprietary Fair Ratio, which adjusts for factors like growth rates, profit margins, and market cap, is calculated at 28.0x for TMO. This suggests that, after factoring in the company’s growth potential and risks, the market is pricing Thermo Fisher Scientific almost exactly as expected.
With a near match between the current PE and the Fair Ratio, TMO shares appear fairly valued on this measure. There is little reason to believe the stock is either cheap or expensive by PE standards right now.
Result: ABOUT RIGHTUpgrade Your Decision Making: Choose your Thermo Fisher Scientific Narrative
While valuation ratios are useful, a Narrative goes a step further by letting you tell the story behind the numbers. It is your own perspective, combining what you believe about Thermo Fisher Scientific’s future growth, margins, and risks with a connected financial forecast and fair value estimate.
With Narratives, you don't need to be a finance expert to build a forward-looking picture. The Simply Wall St platform helps millions of investors easily create, save, and update their own view of a company, connecting their assumptions about revenue or profit trends directly to a fair value and making complicated analysis accessible.
Narratives are powerful because they dynamically adjust as real-world news, earnings reports, or industry shifts come in. This helps you compare your fair value to the current price and make buy or sell decisions in context, instead of relying on static models.
For example, one investor may see strong demand for personalized medicine and believe Thermo Fisher Scientific deserves a fair value of $767 per share, while another, focused on global headwinds, estimates just $450. This shows how Narratives reveal the range of possible outlooks and help you invest with confidence in your own story.
Do you think there's more to the story for Thermo Fisher Scientific? Create your own Narrative to let the Community know!This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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