Should You Think About Buying Thermo Fisher Scientific Inc. (NYSE:TMO) Now?
Let's talk about the popular Thermo Fisher Scientific Inc. (NYSE:TMO). The company's shares saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Thermo Fisher Scientific’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Thermo Fisher Scientific
What Is Thermo Fisher Scientific Worth?
According to my 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. 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 32.35x is currently trading slightly above its industry peers’ ratio of 31.44x, 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, Thermo Fisher Scientific’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Thermo Fisher Scientific?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Thermo Fisher Scientific's earnings over the next few years are expected to increase by 28%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
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 financial strength of the company. 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Thermo Fisher Scientific you should know about.
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.
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