Thermo Fisher Scientific Inc. (NYSE: TMO) proves science can be a lucrative business.
To explain, Thermo Fisher (TMO) manufactures the tools scientists use for research. Those tools include scientific instruments, equipment, software, services, and consumables. Thermo Fisher offers solutions for Single-Bio Processing, High-Content Screening, Lab Data Management & Analysis Software, Lab Plasticware, Microarry Analysis, Molecular Biology, Protein Biology, Sequencing, Anatomical Pathology, Clinical & Translational Research, Clinical Microbiology, Diagnostic Testing, Chemicals, Cement, Coal, & Materials, Food and Beverage, Mass Spectrometry, Microbiology, Manufacturing and Processing, Environmental Sciences, Radiation Detection and Measurement.
Hence, Thermo Fisher manufactures the tools scientists need to detect and research threats such as COVID-19. It also supplies the equipment the scientists who create solutions such as COVID-19 vaccines use. Therefore, the pandemic could be good for Thermo Fisher.
Thermo Fisher Grows and Grows
The pandemic year has been good for Thermo Fisher Scientific (TMO). For example, Thermo Fisher experienced four straight quarters of double-digit revenue growth between 30 September 2020 and 30 June 2021.
Stockrow estimates Thermo Fisher’s revenues grew by 35.86% in the quarter ending on 30 September 2020, 54.49% in the quarter ending on 31 December 2021, 59% in the quarter ending on 31 March 2021, and 34.06% on 30 June 2021. Consequently, Thermo Fisher’s quarterly revenues grew from $6.917 billion on 30 June 2020 to $9.273 billion on 30 June 2021.
Additionally, Thermo Fisher’s quarterly gross profit grew from $3.379 billion on 30 June 2020 to $4.535 billion on 30 June 2021. Moreover, the quarterly operating income grew from $1.391 billion to $2.163 billion in the same period.
Mr. Market has noticed Thermo Fisher’s growth. The share price rose from $434.34 on 29 September 2020 to $572.72 on 1 October 2021.
How Much Cash Does Thermo Fisher Generate?
Thermo Fisher (NYSE: TMO) generates cash. The quarterly operating cash flow rose from $1.886 billion on 30 June 2020 to $2.227 billion on June 30, 2021.
In contrast, the quarterly ending cash flow went from $2.827 billion on 30 June 2020 to $5.603 billion on 31 March 2021 to $1.432 billion on 30 June 2021.
Interestingly, Thermo Fisher borrowed money in 2020. The company reported a $1.18 billion quarterly financing cash flow on 30 June 2020. However, the quarterly financing cash flow fell to -$4.85 billion on 31 March 2021 and -$76 million on 30 June 2021. Consequently, the total debt fell from $21.313 billion on 30 June 2020 to $18.777 billion on 30 June 2021.
Conversely, Thermo Fisher’s cash and investments grew from $5.836 billion on 30 June 2020 to $7.034 billion on 30 June 2021. Therefore, Thermo Fisher finished the first pandemic year with more cash and less debt.
What Value Does Thermo Fisher have?
Thermo Fisher (TMO) offers growing value. The company’s total assets grew from $61.593 billion on 30 June 2020 to $67.698 billion on 30 June 2021.
So yes, Thermo Fisher is growing, but I think Mr. Market grossly overvalues its stock. I see nothing in Thermo Fisher’s financial data that justifies the $572.72 share price.
However, I think Thermo Fisher is a growing cash-rich company with a high margin of safety. Appealingly, Thermo Fisher also pays a growing dividend.
Thermo Fisher paid a 26₵ quarterly dividend on 14 September 2021. The quarterly dividend grew from 22₵ on January 15 2021. Furthermore, Thermo Fisher management has scheduled three 26₵ quarterly dividends in 2022. Overall, Thermo Fisher Scientific shares offered a $1.04 forward dividend and a 0.18% forward dividend yield on 1 October 2021.
If you are looking for a safe and cash-rich, dividend-paying stock, that could grow with biotechnology. I think Thermo Fisher is worth a look.
Is Thermo Fisher a Value Investment in Biotechnology?
I think Thermo Fisher Scientific (NYSE: TMO) could be a value investment in biotechnology. To explain, any biotechnology research will require scientific instruments, and Thermo fisher makes those instruments and software to run them.
Moreover, Thermo Fisher serves a large and growing segment of the US economy: healthcare. Statista estimates health expenditures comprised 18% of the US gross domestic product (GDP) in 2020. In contrast, health expenditures comprised 13.3% of the US economy in 2000 and 17.4% of the US GDP in 2010.
If you are seeking a value investment in healthcare and biotechnology. I Thermo Fisher is worth watching. However, I recommend investors wait until the share price falls to a realistic level to buy Thermo Fisher Scientific.