Intrinsic value of Thermo Fisher Scientific - TMO

Previous Close

$187.91

  Intrinsic Value

$72.94

stock screener

  Rating & Target

str. sell

-61%

  Value-price divergence*

-8%

Previous close

$187.91

 
Intrinsic value

$72.94

 
Up/down potential

-61%

 
Rating

str. sell

 
Value-price divergence*

-8%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TMO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 75.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.72
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
Revenue, $m
  18,274
  20,101
  22,011
  24,003
  26,078
  28,237
  30,483
  32,817
  35,243
  37,764
  40,383
  43,106
  45,938
  48,884
  51,949
  55,141
  58,466
  61,931
  65,544
  69,313
  73,246
  77,354
  81,645
  86,129
  90,817
  95,720
  100,850
  106,218
  111,838
  117,723
  123,886
Variable operating expenses, $m
 
  17,114
  18,537
  20,022
  21,568
  23,178
  24,851
  26,591
  28,399
  30,278
  32,230
  32,127
  34,237
  36,432
  38,717
  41,096
  43,574
  46,156
  48,849
  51,658
  54,590
  57,651
  60,849
  64,191
  67,685
  71,339
  75,162
  79,163
  83,351
  87,737
  92,331
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  15,825
  17,114
  18,537
  20,022
  21,568
  23,178
  24,851
  26,591
  28,399
  30,278
  32,230
  32,127
  34,237
  36,432
  38,717
  41,096
  43,574
  46,156
  48,849
  51,658
  54,590
  57,651
  60,849
  64,191
  67,685
  71,339
  75,162
  79,163
  83,351
  87,737
  92,331
Operating income, $m
  2,449
  2,987
  3,474
  3,981
  4,510
  5,060
  5,632
  6,226
  6,844
  7,486
  8,153
  10,980
  11,701
  12,451
  13,232
  14,045
  14,892
  15,774
  16,695
  17,655
  18,657
  19,703
  20,796
  21,938
  23,132
  24,381
  25,688
  27,055
  28,487
  29,985
  31,555
EBITDA, $m
  4,207
  5,972
  6,540
  7,131
  7,748
  8,389
  9,057
  9,750
  10,471
  11,220
  11,998
  12,807
  13,648
  14,523
  15,434
  16,383
  17,370
  18,400
  19,473
  20,593
  21,762
  22,982
  24,257
  25,589
  26,982
  28,439
  29,963
  31,558
  33,227
  34,976
  36,807
Interest expense (income), $m
  458
  554
  636
  722
  812
  905
  1,003
  1,104
  1,209
  1,319
  1,433
  1,551
  1,674
  1,801
  1,934
  2,073
  2,217
  2,367
  2,523
  2,686
  2,856
  3,033
  3,219
  3,412
  3,614
  3,826
  4,047
  4,279
  4,521
  4,774
  5,040
Earnings before tax, $m
  2,024
  2,433
  2,838
  3,259
  3,698
  4,154
  4,629
  5,122
  5,635
  6,167
  6,721
  9,429
  10,027
  10,650
  11,298
  11,973
  12,675
  13,408
  14,172
  14,969
  15,801
  16,670
  17,577
  18,526
  19,518
  20,555
  21,641
  22,777
  23,966
  25,211
  26,516
Tax expense, $m
  -1
  657
  766
  880
  998
  1,122
  1,250
  1,383
  1,521
  1,665
  1,815
  2,546
  2,707
  2,875
  3,050
  3,233
  3,422
  3,620
  3,826
  4,042
  4,266
  4,501
  4,746
  5,002
  5,270
  5,550
  5,843
  6,150
  6,471
  6,807
  7,159
Net income, $m
  2,022
  1,776
  2,072
  2,379
  2,699
  3,033
  3,379
  3,739
  4,113
  4,502
  4,906
  6,883
  7,320
  7,774
  8,247
  8,740
  9,253
  9,788
  10,346
  10,927
  11,535
  12,169
  12,831
  13,524
  14,248
  15,005
  15,798
  16,627
  17,495
  18,404
  19,356

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  802
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  45,908
  49,633
  54,348
  59,267
  64,390
  69,722
  75,267
  81,030
  87,019
  93,243
  99,712
  106,436
  113,428
  120,701
  128,270
  136,150
  144,360
  152,915
  161,836
  171,142
  180,855
  190,997
  201,592
  212,665
  224,240
  236,347
  249,012
  262,267
  276,143
  290,673
  305,891
Adjusted assets (=assets-cash), $m
  45,106
  49,633
  54,348
  59,267
  64,390
  69,722
  75,267
  81,030
  87,019
  93,243
  99,712
  106,436
  113,428
  120,701
  128,270
  136,150
  144,360
  152,915
  161,836
  171,142
  180,855
  190,997
  201,592
  212,665
  224,240
  236,347
  249,012
  262,267
  276,143
  290,673
  305,891
Revenue / Adjusted assets
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
  0.405
Average production assets, $m
  15,877
  17,468
  19,128
  20,859
  22,662
  24,538
  26,490
  28,518
  30,626
  32,817
  35,093
  37,460
  39,920
  42,480
  45,144
  47,917
  50,807
  53,818
  56,957
  60,233
  63,651
  67,221
  70,949
  74,846
  78,920
  83,181
  87,639
  92,304
  97,187
  102,301
  107,657
Working capital, $m
  2,155
  2,875
  3,148
  3,432
  3,729
  4,038
  4,359
  4,693
  5,040
  5,400
  5,775
  6,164
  6,569
  6,990
  7,429
  7,885
  8,361
  8,856
  9,373
  9,912
  10,474
  11,062
  11,675
  12,316
  12,987
  13,688
  14,422
  15,189
  15,993
  16,834
  17,716
Total debt, $m
  16,628
  18,167
  20,629
  23,196
  25,871
  28,654
  31,548
  34,557
  37,683
  40,932
  44,309
  47,818
  51,468
  55,265
  59,216
  63,330
  67,615
  72,081
  76,737
  81,595
  86,665
  91,960
  97,490
  103,270
  109,312
  115,632
  122,243
  129,163
  136,406
  143,990
  151,934
Total liabilities, $m
  24,368
  25,908
  28,370
  30,937
  33,612
  36,395
  39,289
  42,298
  45,424
  48,673
  52,050
  55,559
  59,209
  63,006
  66,957
  71,071
  75,356
  79,822
  84,478
  89,336
  94,406
  99,701
  105,231
  111,011
  117,053
  123,373
  129,984
  136,904
  144,147
  151,731
  159,675
Total equity, $m
  21,539
  23,725
  25,978
  28,330
  30,779
  33,327
  35,978
  38,732
  41,595
  44,570
  47,662
  50,876
  54,218
  57,695
  61,313
  65,080
  69,004
  73,093
  77,358
  81,806
  86,449
  91,297
  96,361
  101,654
  107,187
  112,974
  119,028
  125,364
  131,996
  138,942
  146,216
Total liabilities and equity, $m
  45,907
  49,633
  54,348
  59,267
  64,391
  69,722
  75,267
  81,030
  87,019
  93,243
  99,712
  106,435
  113,427
  120,701
  128,270
  136,151
  144,360
  152,915
  161,836
  171,142
  180,855
  190,998
  201,592
  212,665
  224,240
  236,347
  249,012
  262,268
  276,143
  290,673
  305,891
Debt-to-equity ratio
  0.772
  0.770
  0.790
  0.820
  0.840
  0.860
  0.880
  0.890
  0.910
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.970
  0.980
  0.990
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.020
  1.020
  1.030
  1.030
  1.030
  1.040
  1.040
Adjusted equity ratio
  0.460
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478
  0.478

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,022
  1,776
  2,072
  2,379
  2,699
  3,033
  3,379
  3,739
  4,113
  4,502
  4,906
  6,883
  7,320
  7,774
  8,247
  8,740
  9,253
  9,788
  10,346
  10,927
  11,535
  12,169
  12,831
  13,524
  14,248
  15,005
  15,798
  16,627
  17,495
  18,404
  19,356
Depreciation, amort., depletion, $m
  1,758
  2,985
  3,066
  3,150
  3,238
  3,330
  3,425
  3,524
  3,627
  3,734
  3,845
  1,827
  1,947
  2,072
  2,202
  2,337
  2,478
  2,625
  2,778
  2,938
  3,105
  3,279
  3,461
  3,651
  3,850
  4,058
  4,275
  4,503
  4,741
  4,990
  5,252
Funds from operations, $m
  2,929
  4,761
  5,137
  5,529
  5,938
  6,362
  6,804
  7,263
  7,740
  8,236
  8,751
  8,710
  9,267
  9,847
  10,450
  11,077
  11,731
  12,413
  13,124
  13,866
  14,640
  15,448
  16,292
  17,175
  18,098
  19,063
  20,073
  21,130
  22,236
  23,394
  24,608
Change in working capital, $m
  -227
  261
  273
  285
  297
  309
  321
  334
  347
  360
  375
  389
  405
  421
  438
  456
  475
  495
  517
  539
  563
  587
  614
  641
  670
  701
  734
  768
  804
  841
  881
Cash from operations, $m
  3,156
  4,500
  4,864
  5,245
  5,641
  6,054
  6,483
  6,929
  7,393
  7,875
  8,376
  8,321
  8,862
  9,425
  10,011
  10,621
  11,256
  11,918
  12,607
  13,327
  14,077
  14,861
  15,679
  16,534
  17,427
  18,362
  19,339
  20,362
  21,432
  22,553
  23,727
Maintenance CAPEX, $m
  0
  -774
  -852
  -933
  -1,017
  -1,105
  -1,197
  -1,292
  -1,391
  -1,494
  -1,601
  -1,712
  -1,827
  -1,947
  -2,072
  -2,202
  -2,337
  -2,478
  -2,625
  -2,778
  -2,938
  -3,105
  -3,279
  -3,461
  -3,651
  -3,850
  -4,058
  -4,275
  -4,503
  -4,741
  -4,990
New CAPEX, $m
  -444
  -1,591
  -1,659
  -1,731
  -1,803
  -1,877
  -1,951
  -2,028
  -2,108
  -2,190
  -2,277
  -2,366
  -2,461
  -2,560
  -2,664
  -2,774
  -2,889
  -3,011
  -3,140
  -3,275
  -3,418
  -3,569
  -3,729
  -3,897
  -4,074
  -4,261
  -4,458
  -4,665
  -4,884
  -5,114
  -5,356
Cash from investing activities, $m
  -5,532
  -2,365
  -2,511
  -2,664
  -2,820
  -2,982
  -3,148
  -3,320
  -3,499
  -3,684
  -3,878
  -4,078
  -4,288
  -4,507
  -4,736
  -4,976
  -5,226
  -5,489
  -5,765
  -6,053
  -6,356
  -6,674
  -7,008
  -7,358
  -7,725
  -8,111
  -8,516
  -8,940
  -9,387
  -9,855
  -10,346
Free cash flow, $m
  -2,376
  2,134
  2,353
  2,580
  2,820
  3,072
  3,334
  3,609
  3,894
  4,191
  4,499
  4,243
  4,574
  4,918
  5,275
  5,645
  6,029
  6,428
  6,842
  7,273
  7,720
  8,186
  8,671
  9,176
  9,702
  10,251
  10,824
  11,422
  12,046
  12,698
  13,380
Issuance/(repayment) of debt, $m
  4,174
  2,341
  2,461
  2,567
  2,675
  2,783
  2,894
  3,008
  3,126
  3,249
  3,377
  3,510
  3,650
  3,797
  3,951
  4,114
  4,285
  4,466
  4,657
  4,858
  5,070
  5,294
  5,530
  5,780
  6,042
  6,320
  6,611
  6,919
  7,243
  7,585
  7,944
Issuance/(repurchase) of shares, $m
  -1,115
  409
  182
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3,099
  2,750
  2,643
  2,567
  2,675
  2,783
  2,894
  3,008
  3,126
  3,249
  3,377
  3,510
  3,650
  3,797
  3,951
  4,114
  4,285
  4,466
  4,657
  4,858
  5,070
  5,294
  5,530
  5,780
  6,042
  6,320
  6,611
  6,919
  7,243
  7,585
  7,944
Total cash flow (excl. dividends), $m
  572
  4,885
  4,996
  5,148
  5,495
  5,855
  6,229
  6,617
  7,020
  7,440
  7,875
  7,753
  8,224
  8,715
  9,226
  9,759
  10,315
  10,894
  11,499
  12,131
  12,791
  13,480
  14,201
  14,956
  15,745
  16,571
  17,435
  18,341
  19,289
  20,283
  21,324
Retained Cash Flow (-), $m
  -189
  -2,186
  -2,254
  -2,351
  -2,449
  -2,549
  -2,650
  -2,755
  -2,863
  -2,975
  -3,092
  -3,214
  -3,342
  -3,477
  -3,618
  -3,767
  -3,924
  -4,090
  -4,264
  -4,448
  -4,643
  -4,848
  -5,064
  -5,293
  -5,533
  -5,787
  -6,054
  -6,336
  -6,633
  -6,945
  -7,274
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,699
  2,743
  2,797
  3,046
  3,306
  3,578
  3,862
  4,158
  4,465
  4,783
  4,539
  4,882
  5,238
  5,608
  5,992
  6,391
  6,805
  7,235
  7,682
  8,148
  8,632
  9,137
  9,663
  10,212
  10,784
  11,381
  12,005
  12,657
  13,338
  14,050
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  2,518
  2,371
  2,224
  2,211
  2,173
  2,112
  2,027
  1,921
  1,797
  1,659
  1,340
  1,212
  1,078
  944
  812
  686
  569
  463
  369
  288
  220
  164
  119
  84
  58
  39
  26
  16
  10
  6
Current shareholders' claim on cash, %
  100
  99.5
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2
  99.2

Thermo Fisher Scientific Inc. develops, manufactures and sells a range of products. The Company provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. It operates through four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Services. The Life Sciences Solutions segment provides a portfolio of reagents, instruments and consumables. The Analytical Instruments segment provides a range of instruments, consumables, software and services. The Specialty Diagnostics segment offers a range of diagnostic test kits, reagents, culture media, instruments and associated products. The Laboratory Products and Services segment offers controlled temperature technologies products, growth protection and separation products, and water and laboratory products.

FINANCIAL RATIOS  of  Thermo Fisher Scientific (TMO)

Valuation Ratios
P/E Ratio 36.6
Price to Sales 4
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 23.4
Price to Free Cash Flow 27.3
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 5%
Cap. Spend. - 3 Yr. Gr. Rate 9.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 71.4%
Total Debt to Equity 77.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 5.9%
Return On Total Capital 5.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.8%
Return On Equity 9.4%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 45.8%
Gross Margin - 3 Yr. Avg. 45.3%
EBITDA Margin 23.2%
EBITDA Margin - 3 Yr. Avg. 24%
Operating Margin 13.4%
Oper. Margin - 3 Yr. Avg. 14%
Pre-Tax Margin 11.1%
Pre-Tax Margin - 3 Yr. Avg. 11.6%
Net Profit Margin 11.1%
Net Profit Margin - 3 Yr. Avg. 11.3%
Effective Tax Rate -0%
Eff/ Tax Rate - 3 Yr. Avg. 2.3%
Payout Ratio 11.8%

TMO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TMO stock intrinsic value calculation we used $18274 million for the last fiscal year's total revenue generated by Thermo Fisher Scientific. The default revenue input number comes from 2016 income statement of Thermo Fisher Scientific. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TMO stock valuation model: a) initial revenue growth rate of 10% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.2%, whose default value for TMO is calculated based on our internal credit rating of Thermo Fisher Scientific, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Thermo Fisher Scientific.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TMO stock the variable cost ratio is equal to 86.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for TMO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Thermo Fisher Scientific.

Corporate tax rate of 27% is the nominal tax rate for Thermo Fisher Scientific. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TMO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TMO are equal to 86.9%.

Life of production assets of 20.5 years is the average useful life of capital assets used in Thermo Fisher Scientific operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TMO is equal to 14.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $21539 million for Thermo Fisher Scientific - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 401.761 million for Thermo Fisher Scientific is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Thermo Fisher Scientific at the current share price and the inputted number of shares is $75.5 billion.

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Financial statements of TMO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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