Why Thermo Fisher Scientific Inc. (NYSE:TMO) Could Be Worth Watching

Today we're going to take a look at the well-established Thermo Fisher Scientific Inc. (NYSE:TMO). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$599 at one point, and dropping to the lows of US$538. 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$575 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.

View our latest analysis for Thermo Fisher Scientific

What Is Thermo Fisher Scientific Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 36.59x is currently trading slightly below its industry peers’ ratio of 41.29x, which means if you buy Thermo Fisher Scientific today, you’d be paying a reasonable price for it. And if you believe that Thermo Fisher Scientific should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Thermo Fisher Scientific’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Thermo Fisher Scientific generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 39% over the next couple of years, the future seems bright 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 optimal 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 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Thermo Fisher Scientific, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.