Argus: Buy Thermo Fisher On Valuation, Margins

• Thermo Fisher Scientific Inc. TMO shares are down 5 percent since July 7, trading below the $130 mark since August 21.
• Argus’ John Eade initiated coverage of the company with a Buy rating and a price target of $145.
• Eade expects Thermo Fisher’s margins to expand through 2015 and 2016 and believes that the stock valuation should be higher than the current levels.

Analyst John Eade said that Thermo Fisher is a “well- managed” company and has been generating consistent growth. Over the last five years, the company has reported a 13 percent revenue CAGR, 16 percent net income growth and adjusted EPS growth of 19.4 percent.

Eade expects the company to sustain this growth locally and improve its sales and margins globally. The analyst believes Thermo Fisher share’s valuation multiples should be higher than its current level, which is at the lower half of the industry range.

In the report Argus noted, “Relative to peers in the medical diagnostics industry, TMO is currently trading in the lower half of the P/E range of 12-21 and the price/sales range of 1.2-4.8. Based on the company's long record of solid growth, we think that TMO should trade in the upper half of the peer group range.”