Last update on 2024-06-05

Thermo Fisher Scientific (TMO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analysis of Thermo Fisher Scientific (TMO) using the Piotroski F-Score for 2023 with a final score of 5/9, reflecting aspects of profitability, liquidity, and leverage.

Short Analysis - Piotroski Score: 5

We're running Thermo Fisher Scientific (TMO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Thermo Fisher Scientific (TMO) was evaluated using the Piotroski F-Score system, which examines nine different financial criteria to assess a company's strength. TMO got 5 points out of 9. Here's a breakdown: 1. Profitability: TMO has positive net income and cash flow, but its Return on Assets (ROA) has decreased. 2. Liquidity: The company's leverage ratio increased, but its current ratio saw improvement. 3. Operating Efficiency: The company's shares outstanding reduced, but its gross margin and asset turnover ratio both declined.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 5, Thermo Fisher Scientific shows mixed results. It's good at generating profits and cash flow but could improve in asset efficiency and debt management. The company looks financially healthy but there are areas for improvement. If you're an investor, it might be worth considering, but further analysis should be done to understand other aspects like market conditions and industry performance before making a final decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Thermo Fisher Scientific (TMO)

Company has a positive net income?

Net income is the profit a company makes after deducting all costs, taxes, and expenses. Positive net income indicates profitability, which is crucial for the company's sustainability and growth.

The net income of Thermo Fisher Scientific (TMO) in 2023 is $5,995,000,000, which is positive. This is an essential criterion as it reflects the company's profitability. Looking at the historical data for the last 20 years, we can observe a general upward trend in net income, showcasing continuous growth with occasional fluctuations. In 2003, the net income was only $200,009,000, but it has grown significantly over the two decades, peaking at $7,725,000,000 in 2021. Despite a slight drop from the peak in 2021, the positive net income for 2023 qualifies for an additional point in the Piotroski analysis. This steady increase points to good financial health and effective management by the company.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the amount of cash a company generates from its regular business operations, excluding any financing or investing activities. It is a key indicator of a company’s financial health and its ability to generate sufficient cash to maintain and grow operations, reinvest in the business, and return capital to shareholders.

For Thermo Fisher Scientific (TMO) in 2023, the CFO stands at a positive $8.406 billion. Analyzing the CFO trend, the company has shown a consistent ability to generate positive cash flow from its operations, which is a good indicator of operational efficiency. Over the last 20 years, TMO's CFO has dramatically increased from $216.7 million in 2003 to the current $8.406 billion in 2023. This trajectory highlights a strong growth pattern and showcases the company’s ability to adapt, scale, and thrive. Hence, TMO meets this Piotroski criterion, earning a point.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures how effectively a company uses its assets to generate earnings. An increase in ROA indicates better financial performance.

Comparing the ROA values, Thermo Fisher Scientific's ROA decreased from 0.0723 in 2022 to 0.0612 in 2023, which recommends allocating 0 points as per the Piotroski criteria. This downward trend contrasts with its operating cash flow and reflects negatively on its asset efficiency. Over the last 20 years, the company's ROA has often been lower than the industry median, signaling a chronic underperformance in asset utilization. This trend suggests a need for strategic reassessment.

Operating Cashflow are higher than Netincome?

This criterion checks if the company's operating cash flow exceeds its net income. It's an important indicator because it suggests the company is generating more cash from its core operations than it's reporting as earnings.

For Thermo Fisher Scientific in 2023, the Operating Cash Flow (OCF) was $8.406 billion, while the Net Income was $5.995 billion. Given that the OCF is indeed higher, this fulfills the criterion, earning the company 1 point. This trend might indicate that the company's earnings quality is high as it's generating strong cash flows relative to reported income. Comparing with historical data, this positive relationship has been maintained consistently since 2003, reflecting robust operating efficiency over the years.

Liquidity of Thermo Fisher Scientific (TMO)

Leverage is declining?

Change in Leverage checks to assess the company's risk and financial structure by comparing long-term debt to equity. Sustainable debt levels indicate healthier financials.

For Thermo Fisher Scientific (TMO), the leverage ratio increased from 0.2976 in 2022 to 0.3171 in 2023, indicating a shift towards more debt relative to equity. Historically, TMO has maintained fluctuations in leverage, reaching a peak in 2019 with 0.3399 and showing lower levels in earlier years, such as 0.0677 in 2003. However, the rise to 0.3171 in 2023 after a decrease in 2022 from 0.3399 signifies a less favorable trend in debt management. Hence, this criterion scores 0 as the leverage has increased, reflecting higher risk.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. An increase in the Current Ratio is generally positive, indicating improved liquidity.

For Thermo Fisher Scientific (TMO), the Current Ratio rose from 1.4832 in 2022 to 1.7549 in 2023, showcasing an increase in liquidity. Over the past 20 years, TMO's Current Ratio has varied significantly, from a low of 1.2224 in 2014 to a peak of 3.1608 in 2013. In 2023, it remains lower than the industry's median of 2.3682. Nevertheless, the upward trajectory from 2022 to 2023 is a good sign, reflecting better short-term financial health. Thus, Thermo Fisher gains 1 point for this criterion.

Number of shares not diluted?

Change in Shares Outstanding reflects the shares held it determines if a company might have bought back shares or issued new ones.

Thermo Fisher Scientific's outstanding shares decreased from 392,000,000 in 2022 to 386,000,000 in 2023—a reduction by 6,000,000 shares or approximately 1.53%. Over the last 20 years, except for some fluctuations due to acquisitions, there's been a clear decrease, with a peak at 443,700,000 shares in 2007. This buyback can signal the company’s confidence in its future outlook, reduce dividend payouts, or even bolster earnings per share. Therefore, we assign 1 point to this criterion.

Operating of Thermo Fisher Scientific (TMO)

Cross Margin is growing?

Change in Gross Margin evaluates the profitability trend by checking if the company's Gross Margin has increased or decreased from the previous year. It's crucial as improving margins often indicate better cost management or enhanced pricing power.

In 2023, Thermo Fisher Scientific's Gross Margin was 0.399 compared to 0.4224 in 2022, indicating a decrease. Thus, the score for this criterion is 0. Historically, Thermo Fisher’s margin has seen fluctuation: a peak at 0.5008 in 2021, followed by a decline. Compared to the industry median of 0.504 in 2023, the company is underperforming, further highlighting the need for strategic improvements.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. It's a critical indicator in Piotroski Analysis, denoting operational efficiency.

Based on the provided data, Thermo Fisher Scientific (TMO) had an Asset Turnover Ratio of 0.4376 in 2023, decreasing from 0.4672 in 2022. This decline of approximately 6.33% signifies that TMO's efficiency in utilizing its assets to generate sales has deteriorated slightly over the past year. Historically, over the last two decades, TMO has seen variations in its asset turnover ratio, peaking at 0.6727 in 2005 and hitting a low of 0.2972 in 2006. The recent downturn continues a trend seen since its peak in 2020 at 0.5064. Given that the Asset Turnover ratio has decreased, this criterion will receive 0 points in the Piotroski Analysis, reflecting negatively on the company's operational efficiency.