Thermo Fisher (TMO) Hits 52-Week High, Can the Run Continue?
Have you been paying attention to shares of Thermo Fisher Scientific (TMO)? Shares have been on the move with the stock up 8.2% over the past month. The stock hit a new 52-week high of $473.84 in the previous session. Thermo Fisher Scientific has gained 44.2% since the start of the year compared to the 1.6% move for the Zacks Medical sector and the 21.4% return for the Zacks Medical - Instruments industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 22, 2020, Thermo Fisher reported EPS of $3.89 versus consensus estimate of $2.67.
For the current fiscal year, Thermo Fisher is expected to post earnings of $15.99 per share on $29.14 billion in revenues. This represents a 29.47% change in EPS on a 14.07% change in revenues. For the next fiscal year, the company is expected to earn $17.58 per share on $30.99 billion in revenues. This represents a year-over-year change of 9.91% and 6.36%, respectively.
Thermo Fisher may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Thermo Fisher has a Value Score of C. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 29.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 25.9X versus its peer group's average of 24.2X. Additionally, the stock has a PEG ratio of 1.89. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Thermo Fisher currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Thermo Fisher passes the test. Thus, it seems as though Thermo Fisher shares could still be poised for more gains ahead.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.