Thermo Fisher Scientific (NYSE 🙂 is an international leader in science and technology. Their mission is to enable their customers to make the planet healthier, cleaner, safer.

More than 400,000 clients use it, from pharmaceutical and biotech firms to hospitals, clinics, universities and research institutes as well as government agencies.

Thermo Fisher is the largest company in the sector, with more than 80,000 employees. Thermo Fisher leveraged its experience in this space over the years to assist all its clients in fighting COVID-19.

Actually, the pandemic was a great catalyst to the company’s expansion, which has greatly boosted its financials. Since the pandemic’s onset, the stock has almost doubled.

However, the shares have potential upside and I remain bullish. (See Analysts’ Top Stocks on TipRanks)

Strong Financial Advancament

Thermo Fisher’s COVID-19 gain was clearly evident in Thermo Fisher’s Q2 results. The numbers came in strong. It continued riding the rising demand for diagnostics and reported notable revenue growth of 34% up to $9.3 Billion.

Thermo Fisher’s diagnostic and laboratory products and services enjoy unprecedented demand, leading to a 19.7% net income margin.

The combination record sales and high margins led to Thermo Fisher reporting quarterly profits of $4.61. That’s 59% better than the Q2 2020.

Management decided to capitalize on the company’s ongoing momentum by investing in emerging and high-growth markets during the first half 2021 in order to take advantage of its unparalleled scalability.

Thermo Fisher, specifically, increased its capacity to supply vaccine and treatment production around the globe in Q2 by increasing its own manufacturing of laboratory plastics in North America, Europe, and North America.

Thermo Fisher has also established a new facility for plasmid DNA in Carlsbad to address the rising demand for mRNA and plasmid DNA-based treatments.

The company has used its higher profitability in order to rapidly expand its operations over the last couple of years. This should ensure that its momentum is maintained, even with COVID-19 weakness.

Valuation

The management reported in the most recent quarterly results that they expect FY 2021 adjusted earnings per share of $22.07 (which implies a PE of 26.2). The Multiple is expected to be lower given the fact that Thermo Fisher often beats its own estimates.

This price is fair considering the firm’s strong moat, mission critical operations and continued growth. It also reflects the low interest environment.

Although the dividend growth has been steady for the last four years (with the recent 18% increase), the return is still very low.

Future returns should be expected to come in capital gains for investors.

Wall Street’s Take

Thermo Fisher’s consensus rating is Strong Buy. It was based upon 13 Buys and two Holds. There have been no Sells in the last three months. At $648.07, the average Thermo Fisher price target implies 12% upside potential.

Disclosure: Nikolaos Sismanis didn’t hold any position at the time this article was published.

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