Thermo Fisher Scientific (TMO) bills itself as “the world leader in serving science.” The life-sciences titan provides a variety of equipment, supplies, and services for both the research and practical sides of the healthcare market, Richard Moroney, editor of Dow Theory Forecasts.

This wide-screen approach has supported impressive growth. Sales rose 21% in the 12 months ended September, with per-share profits up 29% and operating cash flow 38%. Over the last five years, Thermo Fisher managed annualized growth of at least 13% in all three metrics.

We’re adding the stock to our Focus List because we see a lot of reasons for optimism about the shares. Here are just a few:

 1) Thermo Fisher operates in four business units: laboratory products and services, analytical instruments, specialty diagnostics and life-sciences solutions. Most of Thermo Fisher’s operations assist companies doing pharmaceutical, genetic, or industrial research. Such diversity limits Thermo Fisher’s exposure to weakness in any individual slice of the health-care sector.

2) Thermo Fisher’s business mix allows it to target multiple end markets. In the first three quarters of 2018, the company generated 38% of its revenue from drug and biotechnology firms, with the rest coming from health-care providers and diagnostic labs (21%), industrial and applied science firms (19%), and academic or government researchers (22%).

3) Thermo Fisher, with sales of nearly $24 billion in the last year and a stock-market value of nearly $100 billion, is the giant of the life-sciences group, more than twice the size of its largest competitor. In this highly fragmented industry, most rivals focus on one or two specialties, while Thermo can provide turnkey product and service packages other companies cannot.

4) Since Jan. 2, when Bristol-Myers Squibb (BMY) announced plans to acquire Celgene (CELG), life-sciences stocks have rallied an average of 4%. This after averaging declines of 17% in the previous month. We have no qualms about riding a rally, as long as a stock remains reasonably valued — which brings us to the last key sign of health.

5) Thermo Fisher trades at a low premium; the stock sells at 22 times trailing earnings, 11% below the median for life-sciences companies in the S&P 1500 Index and 24% below its own three-year average.

The consensus projects growth of 3% in sales and 14% in per-share profits for the December quarter (results expected Jan. 30) and growth of 5% in sales and 11% in profits for full-year 2019. Analysts expect that double-digit growth to continue, calling for annual profit growth of more than 11% over the next five years.

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