Should You Invest in Thermo Fisher Scientific?

OVERVIEW

Thermo Fisher Scientific Incorporation is a pharmaceutical company that offers both hardware and software products to its consumers. Some hardware includes different types of lab equipment, diagnostic tests, storage for different drugs and chemicals, as well as different consumable products. It also offers several software solutions to streamline drug research and development as well as testing.

Why You Should?

  1. The COVID-19 Pandemic has greatly benefited the company. The company has partnered with several clinics to produce COVID-19 Tests. Overall, this company provides both hardware such as storage devices and the actual test. They also offer software capabilities to aid this effort as well. This caused a spike in demand for the company’s products.
  2. The company offers a wide range of products. From lab equipment used to research and develop new drugs as well as several types of diagnostic test kits, this company never seems to see drops in demand for its products. This comes to show that the company is resilient through tough economic times and can sustain demand for its products for long periods of time.
  3. The company needs to continuously innovate its products and has cash on hand to do so. This benefits the company in the long term as the creation of new, sought after products will generate both revenue and profits for the company. This also allowed the company to quickly start manufacturing COVID-19 tests on short notice.
  4. The company has strong financials over the past couple of years. The company has seen rising revenues due to strong growth but has not turned a profit yet. The graph below shows the company report higher revenues and profits for the past couple of financial years. This occurs because of diverse business and will continue to grow in the long term due to the high demand for the company’s products. In the financial year of 2019, the company reported revenues of around 25.5 billion and profits of 3.7 billion. Both of these metrics are up from the financial year of 2018 when the company reported around 24.4 billion in revenues and around 2.9 billion in profits.

Why You Should Not?

  1. The current political landscape does not bode well for the company. Politicians from both sides of the aisle want to dramatically reduce the price of healthcare for Americans. This will lead to a steep decline in profits for the company because they provide both hardware and software for drug research as well as several diagnostic tests.
  2. The stock is very expensive. The company is trading at over $400 right now which is 45 times earnings. This leads to more volatility in the stock price and won’t be the safest investment. I would wait for the stock price to drop slightly before entering this company.

MY OPINION

In my opinion, I think that Thermo Fisher Scientific is a great long term investment due to its strong financials and diverse business. However, an expensive stock and a negative political landscape might hurt the company in the future.

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