We have had a nice little rally in the market over the last week or so. However, the debt crisis in Europe is a long way from over. It will not be long before bad news from across the pond knocks our market down significantly again. Given that, I am making shopping list of good-quality, low-valuation stocks in defensive sectors to buy on any pullbacks. One such stock is Thermo Fisher Scientific.
Thermo Fisher Scientific (NYSE:DD) – “Thermo Fisher Scientific Inc. provides analytical instruments, equipment, reagents and consumables, software, and services for research, manufacture, analysis, discovery, and diagnostics.” (Business Description from Yahoo Finance.)
Eight reasons TMO is a bargain at $52:
- TMO is trading just above long term technical support (see chart):Click to enlarge
- Thermo Fisher has beat earnings estimates by an average of 5% above consensus over the last four quarters.
- TMO has a forward P/E of just 10.6, over a 30% discount to its five-year historical average.
- The company sports an A rated balance sheet, a below-average beta (.83) and a five-year projected PEG of .88.
- TMO is selling near the bottom of its five year valuation range based on P/B, P/S, P/E and P/CF.
- Consensus EPS estimates for 2011 and 2012 have risen over the past three months. TMO also is expected to have 10% revenue growth in both years.
- It has expanding rapidly in the emerging markets, has bought back almost 10% of its shares since 2010 and raised its earnings by an average of 15% a year over the past five years.
- TMO is selling significantly under analysts’ price targets. S&P is currently at $82 on Thermo Fisher, and the median analyst target on TMO is $69.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TMO over the next 72 hours.