Like all investments, Thermo Fisher Scientific (TMO) comes with pros and cons. At this moment, the biggest con is the likelihood that Covid-related sales will continue to lose steam, Rich Moroney, editor of Dow Theory Forecasts.

Fortunately, Thermo has other ways to stoke the engine. The company provides medical instruments and services designed to assist with product research for companies in the drug, life-sciences, and industrial markets.

Not surprisingly, the company’s broad range of offerings made it appealing to companies seeking to test for, vaccinate against, or treat the coronavirus. Over the last three years, per-share profits rose at an annualized rate of 27%.

That growth got investors excited enough to drive a 105% rise in the stock price from the end of 2019 through the end of 2021. The shares have declined 20% so far this year, hurt by concerns about replacing Covid-related revenue, rising costs, and the potential of a global economic slowdown.

In November, Thermo Fisher approved the repurchase of $4 billion in shares, equating to roughly 2% of outstanding stock at current prices. Meanwhile, the company generates solid operating momentum in its core (non-Covid) business, as evidenced by organic revenue growth of 14% in the September quarter.

Thermo’s core customers continue to spend aggressively. The S&P 1500 pharmaceutical industry’s R&D increased about 10% over the last year, the eighth consecutive rolling 12-month period with double-digit growth.

Thermo Fisher has a history of growing via mergers. Thermo paid $17.4 billion, almost all in cash, for PPD, a clinical-research provider, a deal that closed in December.

The firm's penchant for deals adds risk to the stock. But Thermo has historically integrated its buys efficiently and targeted companies that fill niches or open new markets, rather than simply adding scale. In the September quarter, acquisitions boosted revenue 20%.

We rate the stock a Focus List Buy and would also buy the stock at current levels. While investors’ concerns about the future have some merit, we believe the Focus List Buy-rated Thermo Fisher is focused on the right goals for a post-pandemic reality.

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