Thermo Fisher Scientific Inc. (NYSE:TMO) saw significant share price movement during recent months on the NYSE, rising to highs of US$604 and falling to the lows of US$509. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Thermo Fisher Scientific's current trading price of US$509 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Thermo Fisher Scientific’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Thermo Fisher Scientific Worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.79x is currently trading slightly above its industry peers’ ratio of 23.76x, which means if you buy Thermo Fisher Scientific today, you’d be paying a relatively reasonable price for it. And if you believe that Thermo Fisher Scientific should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Thermo Fisher Scientific’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Thermo Fisher Scientific look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Thermo Fisher Scientific. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? TMO’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at TMO? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on TMO, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for TMO, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Thermo Fisher Scientific has 2 warning signs and it would be unwise to ignore them.
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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.
Thermo Fisher Scientific
Thermo Fisher Scientific Inc. offers life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and service worldwide.
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Adequate balance sheet with questionable track record.