Thermo Fisher Scientific might already be on your watchlist, but the real question is whether the current share price around US$474 reflects what you are actually getting for your money.
Recent share price moves have been mixed, with the stock up 2.2% over the last week, while the 30 day return is a 7.2% decline and the year to date return sits at a 19.9% decline, contributing to a 1 year return of an 8.0% decline and a 3 year return of a 14.2% decline.
These returns sit against an ongoing flow of company updates, industry developments and broader healthcare sentiment that can all influence how investors are thinking about Thermo Fisher Scientific’s prospects and risk profile. Taken together, this context helps explain why the share price has been moving without relying on any single short term story.
Simply Wall St’s valuation model currently gives Thermo Fisher Scientific a value score of 5 out of 6. The next step is to look at how different valuation methods such as DCFs, multiples and peer comparisons line up, before finishing with a broader way to think about what the valuation really means for you.
A DCF model takes estimated future cash flows, discounts them back to today using a required return, and sums them to arrive at an estimate of what the business might be worth per share.
For Thermo Fisher Scientific, the model uses a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is around $6.31b. Analysts provide explicit free cash flow estimates for the next few years, and Simply Wall St then extrapolates these to extend the forecast period.
Within this framework, free cash flow is projected to reach about $9.60b by 2028, with further estimates out to 2035 built from a mix of analyst inputs and calculated growth rates. These projected cash flows are discounted back to today in $, and combined to produce an estimated intrinsic value per share of about $512.08.
Against a current share price around $474, this implies a discount of roughly 7.4%, which points to the shares trading close to the model’s estimate of fair value.
Result: ABOUT RIGHT
Thermo Fisher Scientific is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of current earnings. A higher or lower P/E can make sense depending on what the market expects for future growth and how risky those earnings are perceived to be, so there is no single “right” number in isolation.
Thermo Fisher Scientific currently trades on a P/E of about 26.3x. This sits below the Life Sciences industry average P/E of around 31.2x and also below the peer group average of roughly 31.9x. Simply Wall St’s Fair Ratio for Thermo Fisher Scientific is 29.5x, which is the P/E level suggested by its combination of earnings growth profile, industry, profit margins, market cap and risk characteristics.
The Fair Ratio aims to be more tailored than a simple peer or industry comparison because it adjusts for company specific traits such as growth, risk and profitability, rather than assuming all peers deserve similar multiples. Comparing the current 26.3x P/E with the 29.5x Fair Ratio points to Thermo Fisher Scientific trading below this model based reference point.
Earlier it was mentioned that there is an even better way to understand valuation, and on Simply Wall St this takes the form of Narratives. These are clear stories that link your view of Thermo Fisher Scientific’s business to specific numbers for future revenue, earnings, margins and a fair value, then compare that fair value with the current price to help you assess whether the gap looks attractive or not.
A Narrative is built and shared on the Community page so it is easy to use. It updates as new facts arrive, so when fresh news, earnings or analyst forecasts are added, the forecast and fair value inside that story refresh automatically rather than sitting as a one-off snapshot.
For Thermo Fisher Scientific, one investor on the platform might align with a higher fair value near US$743, based on faster growth and a higher future P/E. Another might focus on risks and use a lower fair value around US$575. By seeing both Narratives side by side, you can decide which story and set of assumptions feel closer to your own view before taking any action.
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.
