DCF Studio

    TMO · NYQ · Healthcare

    Thermo Fisher Scientific Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 201.34

    Market price

    USD 651.45

    Implied upside

    -69.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 24.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 201.34-69.1%
    Exit multiple
    USD 414.43-36.4%
    Market price
    USD 651.45

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 44.4bnUSD 44.3bnUSD 44.2bnUSD 44.1bnUSD 44.0bn-0.3%
    EBITUSD 8.0bnUSD 8.0bnUSD 8.0bnUSD 8.0bnUSD 7.9bn-0.3%
    NOPATUSD 7.4bnUSD 7.3bnUSD 7.3bnUSD 7.3bnUSD 7.3bn-0.3%
    Add depreciation & amortisationUSD 3.2bnUSD 3.2bnUSD 3.2bnUSD 3.2bnUSD 3.2bn-0.3%
    Less capital expenditureUSD -1.7bnUSD -1.7bnUSD -1.7bnUSD -1.7bnUSD -1.7bn-0.3%
    Less increase in working capitalUSD 118.7mUSD 118.4mUSD 118.1mUSD 117.8mUSD 117.4m+0.3%
    Free cashflow to firmUSD 9.0bnUSD 9.0bnUSD 9.0bnUSD 8.9bnUSD 8.9bn-0.3%
    Discount factor0.95690.87630.80240.73480.6728-
    Present valueUSD 8.6bnUSD 7.9bnUSD 7.2bnUSD 6.6bnUSD 6.0bn-8.7%
    Present Value Of The ForecastUSD 36.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.902Reported 0.854, pulled toward 1.0 (Blume)
    Cost of equity9.96%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 240.9bn85.9% of capital
    Total debtUSD 39.4bn14.1% of capital, book value as a proxy
    Tax rate8.2%Effective, capped at statutory
    WACC9.20%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 201.34

    66% of EV

    Forecast FCFF, final year
    USD 8.9bn
    Capex at depreciation, working capital in reinvestment
    USD 9.2bn
    Less reinvestment at g/ROIC (27.2% of NOPAT)
    USD -2.5bn
    Capitalised
    USD 6.7bn
    ROIC (WACC floor)
    9.2%
    Terminal value, undiscounted
    USD 102.7bn
    Terminal value, discounted
    USD 69.1bn
    Enterprise value
    USD 105.4bn
    Less net debt
    USD 29.3bn
    Equity value
    USD 76.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 414.43

    80% of EV

    Terminal value, undiscounted
    USD 222.4bn
    Terminal value, discounted
    USD 149.7bn
    Enterprise value
    USD 185.9bn
    Less net debt
    USD 29.3bn
    Equity value
    USD 156.7bn

    Spread between methods: 69%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.20%284.13290.06297.03305.40315.75
    8.20%233.89235.64237.54239.60241.88
    9.20%199.56200.45201.34202.24203.13
    10.20%173.26174.03174.80175.57176.35
    11.20%151.66152.33153.01153.68154.36

    Outlined: this model. Green text: above today's price of 651.45. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-0.3%33.6%+33.9pp
    EBIT margin18.1%54.5%+36.5pp
    Discount rate9.2%4.8%-4.4pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.