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โ Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $TMO ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 17.84x
โข10-Year Mean: 22.02x
โขNTM FCF Yield: 4.97%
โข10-Year Mean: 4.16%
As you can see, $TMO appears to be trading below fair value
Going forward, investors can receive ~23% MORE in earnings per share & ~19% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $TMO is a great business
BALANCE SHEET๐
โขCash & Short-Term Inv: $5.95B
โขLong-Term Debt: $31.24B
$TMO has a good balance sheet (acquisitions a big growth driver), a A- S&P Credit Rating & 6x FFO Interest Coverage
RETURN ON CAPITALโ *
โข2019: 8.3%
โข2020: 13.4%
โข2021: 12.8%
โข2022: 10.3%
โข2023: 8.7%
โข2024: 9.2%
*lower ROIC due to acquisition strategy
RETURN ON EQUITYโ
โข2019: 12.9%
โข2020: 19.9%
โข2021: 20.5%
โข2022: 16.4%
โข2023: 13.1%
โข2024: 13.1%
$TMO has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $16.89B
โข2024: $42.88B
โขCAGR: 9.76%
FREE CASH FLOWโ
โข2014: $2.19B
โข2024: $7.27B
โขCAGR: 12.74%
NORMALIZED EPSโ
โข2014: $6.96
โข2024: $21.86
โขCAGR: 12.12%
SHARE BUYBACKS๐
โข2019 Shares Outstanding: 403.00M
โขLTM Shares Outstanding: 381.00M
MARGINSโ
โขLTM Gross Margins: 41.4%
โขLTM Operating Margins: 18.3%
โขLTM Net Income Margins: 15.2%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~23% MORE in EPS & ~19% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $TMO has to grow earnings at an 8.92% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (8.92%) required growth rate:
2025E: $22.47 (2.8% YoY) *FY Dec
2026E: $24.84 (10.6% YoY)
2027E: $27.73 (11.6% YoY)
$TMO has an excellent track record of meeting analyst estimates ~2 years out, letโs assume $TMO ends 2027 with $27.73 in EPS & see its CAGR potential assuming different multiples
24x P/E: $665.52๐ต โฆ ~20.0% CAGR
23x P/E: $637.79๐ต โฆ ~18.1% CAGR
22x P/E: $610.06๐ต โฆ ~16.2% CAGR
21x P/E: $582.33๐ต โฆ ~14.1% CAGR
20x P/E: $554.60๐ต โฆ ~12.1% CAGR
As you can see, $TMO appears to have attractive return potential IF we assume >20x earnings and strong return potential at 22x
Despite $TMOโs earnings dip from 2020-2023 due to pandemic-driven booms followed by biopharma funding & tariff fears, its proven track record of steady growth, among other things, signals a return to normalcy once these overhangs clear
$TMO is an excellent business with a wide moat & will benefit from future ongoing sector demand (AI tailwinds in scientific research), especially their next-gen sequencing machines & chromatography machines
Today at $414๐ต, $TMO is a strong consideration for investment with a large margin of safety
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๏ฟฝ[...]
A quality valuation analysis on $TMO ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 17.84x
โข10-Year Mean: 22.02x
โขNTM FCF Yield: 4.97%
โข10-Year Mean: 4.16%
As you can see, $TMO appears to be trading below fair value
Going forward, investors can receive ~23% MORE in earnings per share & ~19% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $TMO is a great business
BALANCE SHEET๐
โขCash & Short-Term Inv: $5.95B
โขLong-Term Debt: $31.24B
$TMO has a good balance sheet (acquisitions a big growth driver), a A- S&P Credit Rating & 6x FFO Interest Coverage
RETURN ON CAPITALโ *
โข2019: 8.3%
โข2020: 13.4%
โข2021: 12.8%
โข2022: 10.3%
โข2023: 8.7%
โข2024: 9.2%
*lower ROIC due to acquisition strategy
RETURN ON EQUITYโ
โข2019: 12.9%
โข2020: 19.9%
โข2021: 20.5%
โข2022: 16.4%
โข2023: 13.1%
โข2024: 13.1%
$TMO has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $16.89B
โข2024: $42.88B
โขCAGR: 9.76%
FREE CASH FLOWโ
โข2014: $2.19B
โข2024: $7.27B
โขCAGR: 12.74%
NORMALIZED EPSโ
โข2014: $6.96
โข2024: $21.86
โขCAGR: 12.12%
SHARE BUYBACKS๐
โข2019 Shares Outstanding: 403.00M
โขLTM Shares Outstanding: 381.00M
MARGINSโ
โขLTM Gross Margins: 41.4%
โขLTM Operating Margins: 18.3%
โขLTM Net Income Margins: 15.2%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~23% MORE in EPS & ~19% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $TMO has to grow earnings at an 8.92% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (8.92%) required growth rate:
2025E: $22.47 (2.8% YoY) *FY Dec
2026E: $24.84 (10.6% YoY)
2027E: $27.73 (11.6% YoY)
$TMO has an excellent track record of meeting analyst estimates ~2 years out, letโs assume $TMO ends 2027 with $27.73 in EPS & see its CAGR potential assuming different multiples
24x P/E: $665.52๐ต โฆ ~20.0% CAGR
23x P/E: $637.79๐ต โฆ ~18.1% CAGR
22x P/E: $610.06๐ต โฆ ~16.2% CAGR
21x P/E: $582.33๐ต โฆ ~14.1% CAGR
20x P/E: $554.60๐ต โฆ ~12.1% CAGR
As you can see, $TMO appears to have attractive return potential IF we assume >20x earnings and strong return potential at 22x
Despite $TMOโs earnings dip from 2020-2023 due to pandemic-driven booms followed by biopharma funding & tariff fears, its proven track record of steady growth, among other things, signals a return to normalcy once these overhangs clear
$TMO is an excellent business with a wide moat & will benefit from future ongoing sector demand (AI tailwinds in scientific research), especially their next-gen sequencing machines & chromatography machines
Today at $414๐ต, $TMO is a strong consideration for investment with a large margin of safety
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๏ฟฝ[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ A quality valuation analysis on $TMO ๐ง๐ฝโโ๏ธ โขNTM P/E Ratio: 17.84x โข10-Year Mean: 22.02x โขNTM FCF Yield: 4.97% โข10-Year Mean: 4.16% As you can see, $TMO appears to be trading below fair value Going forward, investorsโฆ
๏ฟฝ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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Offshore
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โ Wall St Engine
RT @wallstengine: Morgan Stanley sees AI infrastructure spend topping $3T by 2028. That includes $2.6T on data centers (chips + servers), $210โ330B on new power generation, and likely hundreds of billions more for grid upgrades. https://t.co/TkO2JXuVTx
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RT @wallstengine: Morgan Stanley sees AI infrastructure spend topping $3T by 2028. That includes $2.6T on data centers (chips + servers), $210โ330B on new power generation, and likely hundreds of billions more for grid upgrades. https://t.co/TkO2JXuVTx
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โ Investing visuals
$GOOGL is now down ๐ป24% from its February peak, driven by concerns over AIโs impact on search.
What are your thoughts on $GOOGL right now? https://t.co/GYOHg0VEHS
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$GOOGL is now down ๐ป24% from its February peak, driven by concerns over AIโs impact on search.
What are your thoughts on $GOOGL right now? https://t.co/GYOHg0VEHS
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โ Wall St Engine
Bank of America is sticking with its Buy rating on $GOOGL arguing the core Google Ads & Play businesses trade at just 9x 2026E earnings, well below the S&P 500โs 20x, which they see as compelling value (based on $285 in estimated GAAP EPS for 2026).
That valuation excludes contributions from YouTube, Cloud, Waymo, cash, and still-bleeding Other Betsโso thereโs plenty of optionality.
BoA also highlights that total queries are growing, including on Apple devices, potentially thanks to tools like Circle to Search, image and voice search, the Google app, and Gemini.
On the Apple Safari TAC deal, they estimate it made up about 26% of 2025 net search revenue and 30% of profits, assuming gross revenue from Safari grew 44% over three years. But even with that risk, they believe the downside is priced inโwith $GOOGL trading at just 15x 2026 earnings.
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Bank of America is sticking with its Buy rating on $GOOGL arguing the core Google Ads & Play businesses trade at just 9x 2026E earnings, well below the S&P 500โs 20x, which they see as compelling value (based on $285 in estimated GAAP EPS for 2026).
That valuation excludes contributions from YouTube, Cloud, Waymo, cash, and still-bleeding Other Betsโso thereโs plenty of optionality.
BoA also highlights that total queries are growing, including on Apple devices, potentially thanks to tools like Circle to Search, image and voice search, the Google app, and Gemini.
On the Apple Safari TAC deal, they estimate it made up about 26% of 2025 net search revenue and 30% of profits, assuming gross revenue from Safari grew 44% over three years. But even with that risk, they believe the downside is priced inโwith $GOOGL trading at just 15x 2026 earnings.
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โ Wall St Engine
Dating app parent Match Group (owns Tinder, Hinge, OkCupid, etc.) is cutting 13% of its staffโaround 325 rolesโas it restructures to streamline operations and cut costs. CEO says itโs about moving from siloed brands to one unified company. $100M+ in annual savings expected.
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Dating app parent Match Group (owns Tinder, Hinge, OkCupid, etc.) is cutting 13% of its staffโaround 325 rolesโas it restructures to streamline operations and cut costs. CEO says itโs about moving from siloed brands to one unified company. $100M+ in annual savings expected.
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