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Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Thermo Fisher sells research reagents, bioproduction materials, laboratory equipment and supplies, analytical instruments and diagnostic tests. It also runs clinical trials and manufactures drugs under contract for pharmaceutical and biotech companies, which were about 60% of revenue in Q2 2026, plus universities, hospitals, governments and industrial labs. [S4][S2]
Mostly recurring sales: consumables (about 43% of Q1 2026 revenue) and services such as clinical research, contract manufacturing and instrument service (about 43%), plus one-time instrument sales (about 14%). Distribution of third-party lab products adds low-margin volume. [S42][S4]
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Start with the business evidence, then follow the assumptions through to scenarios and valuation.
Financial data on TradingView ↗Reported statements, ratios and ownership, alongside this research.
Valuation and assumptionsThermo Fisher is a high-quality, mostly recurring supplier to drug developers and labs whose growth is recovering, but the $658.52 price already discounts close to the bull case.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: Solving for the growth and margins that justify $658.52 shows the price needs roughly management's full long-term algorithm.
Valuation: if organic growth settles at 5% to 6% rather than 7%, or rates stay near 5%, the multiple can compress even as the business compounds.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: With the risk-free rate near 5%, the choice between 7% and 8% explains most of the gap between the price and intrinsic value.
About 43% of revenue is consumables, 43% services and 14% instruments (Q1 2026). Pharma and biotech are about 60% of revenue. Bioproduction consumables specified in drug filings and installed-base reagents create switching costs; clinical research and contract manufacturing add scale but lower margins.
Under this report's model (8.0% WACC, 3.5% terminal growth, SBC expensed, 20% cash tax), the price requires about 7.3% annual revenue growth for ten years with margins rising to about 27%, or the base case at a 7.0% cost of capital. Management's own algorithm is worth about $633.
A valuation model that works backward from a share price to find combinations of growth, margins, and other assumptions consistent with that price.
In this report: Solving for the growth and margins that justify $658.52 shows the price needs roughly management's full long-term algorithm.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: With the risk-free rate near 5%, the choice between 7% and 8% explains most of the gap between the price and intrinsic value.
The business is excellent and strengthening operationally, but adjusted EPS overstates owner earnings because cash taxes run near 20% and capex exceeds depreciation. The probability-weighted value is $499, and five-year expected returns of about 3% fall short of an 8.7% cost of equity.
Company-defined earnings per share excluding amortisation of acquired intangibles, restructuring, certain transaction costs and related tax effects.
In this report: It is the market's valuation anchor, but it uses an 11.5% tax rate and ignores excess capex, so it exceeds owner cash earnings by about 25%.
Income taxes actually paid in cash as a share of pre-tax operating profit, as opposed to the tax expense shown in the income statement.
In this report: Thermo Fisher paid about $1.8bn of cash tax a year, near 20% of operating profit before amortisation, well above its adjusted book rate.
Long-run organic growth: each point a year for a decade moves value by about $44 per share, and its plausible range (3% to 7.5%) is the widest uncertainty.
Revenue growth excluding the effects of acquisitions, divestitures and currency translation, as reported by the company.
In this report: Thermo Fisher buys businesses every year, so reported growth overstates the underlying rate; organic growth is the primary value driver.
Operating margin: PPI productivity must outrun dilution from services mix; 100bps across all years is worth about $24 per share.
The sensitivity of operating profit to changes in revenue when some operating costs are fixed.
In this report: Fixed plant, sales and R&D costs mean faster organic growth lifts margins, which is why growth and margin move together in the scenarios.
Cost of capital: with the 10-year Treasury near 5%, each 50bps of WACC moves value by $56 to $70 per share.
The weighted average required return of a company's debt and equity providers, used to discount cash flows to the firm.
In this report: With the risk-free rate near 5%, the choice between 7% and 8% explains most of the gap between the price and intrinsic value.
Research funding cuts and a biotech pullback hold organic growth near 3%; services mix and competition keep margins flat; acquisitions add no value.
Biotech and pharma recovery lifts organic growth to 5% to 6% before fading to 4%; productivity adds about 35bps of margin a year to 24.5%.
Management's 7%-plus growth algorithm is delivered for years, with margins rising 50bps a year to 27% and acquisitions creating clear value.
2027 guidance in January 2027: an organic midpoint below 5% supports this assessment; 6% or more weakens it.
Quarterly organic growth and adjusted margin: four quarters at 7% growth and 25% margin would invalidate the valuation case.
Free cash flow versus adjusted net income: conversion above 90% would undercut the owner-earnings argument.
Not read: 10-K notes (debt maturities, leases, SBC), the 2026 proxy (compensation metrics, insider ownership), and credit-agency reports. Not established: end-market split beyond pharma and biotech, numeric CRO authorisations or book-to-bill, the reporting unit with thin goodwill headroom, Clario's standalone revenue and purchase multiple, recognition of IEEPA tariff refunds, peer ROIC and market shares, and dated forward multiples for peers other than Danaher.
These model scenarios depend on their inputs. Review the assumptions and supporting evidence alongside the implied values.
earnings multiple v2 · as of 2026-10-18
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