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The regional headquarters of biotechnology business Thermo Fisher Scientific in… [+] Sign and logo The 16th of April, 2018 in Pleasanton, California. (Smith Collection/Gado/Getty Images photo)
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Despite having already risen about twofold from its March 2020 low, we feel Thermo Fisher Scientific stock (NYSE: TMO) has more upside potential at its current price of $505 per share. TMO stock has risen from $255 to $505 since its March 2020 low, a little more than the S&P 500, which has risen by about 90% since its lows. Furthermore, the stock is up roughly 50% from where it was prior to the outbreak. Expectations of ongoing demand growth and excellent Q1 2021 results, however, lead us to anticipate that TMO stock might surge to new highs, climbing at least 10% to make new highs above $550. What Factors Caused A 166 Percent Change In Thermo Fisher Scientific Stock Between 2017 And Now, According To Our Dashboard? contains the numbers that support our assumptions.
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The increase in stock price since the end of 2017 is attributable to a 54 percent increase in revenue from $20.92 billion in fiscal year 2017 to $32.2 billion in fiscal year 2020. Furthermore, despite a fairly constant outstanding share count, net margins increased from 10.6 percent to 19.8 percent, resulting in an almost 3x increase in EPS from $5.64 in FY 2017 to $16.09 in FY 2020.
TMO’s P/E (price-to-earnings) ratio fell from 34x in 2017 to 29x by the end of 2020, but has since risen to 31x, riding the tech stock boom. On the basis of continued demand growth and a favorable shareholder return strategy, we believe the company’s P/E ratio has the ability to rise further in the short term, propelling the stock price higher.
What Is The Future Of The Stock?
In early 2020, the global spread of coronavirus and the resulting lockdowns had an impact on manufacturing activities in a variety of industries. TMO, on the other hand, makes analytical laboratory instruments that are utilized in a range of tests, and demand for these instruments has increased as a result of the epidemic. TMO’s Q1 2021 earnings show that revenue increased from $6.23 billion in Q1 2020 to $9.91 billion in Q1 2021. Operating income more than quadrupled, rising from $906 million to $3.05 billion, despite the effective tax rate jumping from 4.8 percent to 15.1 percent, and EPS increased from $1.99 to $5.93 over this time.
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Furthermore, we expect the company will see further revenue and margin expansion in the medium term as the lockdowns are removed and manufacturing capacity increases. These characteristics, when combined with the sustained demand for analytical laboratory tools, will drive investor expectations even higher, resulting in a higher P/E multiple for the company. We anticipate Thermo Fisher Scientific’s stock can gain by at least 10% from present levels, reaching new highs of $550.
While Thermo Fisher Scientific’s stock may rise, it’s important to know how it compares to its competitors. Thermo Fisher Scientific Stock Comparison With Peers shows how the company stacks up against its competitors on key parameters. Peer Comparisons has a lot more of these kinds of valuable comparisons.
Here you may find all of Trefis’ Featured Analyses and Trefis Data.
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