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Thermo Fisher Scientific (TMO) is the combination of Thermo Electron and Fisher Scientific, which was purchased on November 9, 2006. The company has two major business lines - Analytical Technologies and Laboratory Products and Services.

Year …... Sales ….. C/F ….. EPS …... B/V ….... Avg. P/E

2001 ….. 12.41 ….. 1.27 …. 0.69 ….. 10.82 …… 34.3x

2002 ….. 12.81 ….. 1.36 …. 0.88 ….. 12.49 …… 21.4x

2003 ….. 12.71 ….. 1.49 …. 1.10 ….. 14.44 …… 19.0x

2004 ….. 13.74 ….. 1.57 …. 1.24 ….. 16.60 …… 22.9x

2005 ….. 16.21 ….. 1.85 …. 1.54 ….. 17.19 …… 18.4x

2006 …... 9.10 …... 1.44 …. 1.79 ….. 33.37 …… 21.3x

2007 ….. 23.47 ….. 4.66 …. 2.65 ….. 34.89 …… 19.8x

2008 ….. 25.45 ….. 5.20 …. 3.14 ….. 35.60 …… 17.5x

Figures from 2006 reflect just 7 weeks as a combined entity, while 2007 and 2008 numbers reflect the Fisher Scientific purchase on a full-year basis.

Thermo's balance sheet is in good shape with long-term debt at just 12% of capitalization and total interest coverage is greater than 12x. Value Line assigns TMO a 'B++' financial strength rating. Value Line also notes Thermo's 95th percentile rankings for both 'earnings predictability' and 'stock price growth persistence'. These shares have outperformed 95% of the 1700 company Value Line stock universe over the past decade.

At Friday's quote of $31.45, TMO shares are offered at just 10x this year's expected EPS of $3.14 and under 9x next year's estimate of $3.50.

This is the lowest valuation for Thermo Fisher Scientific on record. Its 10-year median P/E has been 24x and Value Line is assuming an 18 multiple for its 3–5 year normalized projections.

TMO shares look to be a fine example of GARP (Growth at a Reasonable Price). This is a high-quality growth story at a decidedly non-premium price point right now.

Even 12 times next year's consensus view of $3.50 EPS would bring TMO shares back to $42 or + 33.5% from Friday's price. That's a very low ball target as these shares touched highs of $46.30, $62, and $62.80 in 2006, 2007 and 2008 respectively when fundamentals were nowhere near as good as they are today.

Disclosure: Author bought shares of TMO on Friday.

Source: Scientific Investing with Thermo Fisher Scientific