The stock of Thermo Fischer has soared. The stock is still cheap and has plenty of upside.

You may have forgotten about Covid’s beneficiary if you did not say Thermo Fischer Scientific (ticker: TMO). You may not have known its name, despite the fact that its products are helping researchers develop new drugs and save lives. It’s important to learn about it now, in either case.

Waltham, Mass.-based firm, is a global leader in laboratory instruments, analytical tools and technologies, as well as specialty diagnostics. These are used by the pharmaceutical, biotech, healthcare and other industries. This allowed Thermo Fisher’s earnings per share, which were $12.35 in 2019, to increase to over $25 by 2021.

Earnings have fallen as the pandemic has faded, and the stock price has followed suit. But the slump shouldn’t last for long

“Many investors are too concerned with what Thermo Fischer did during Covid, and the fact that it is now slowing down. But that’s only a small part of the business,” Craig Sarembock says, principal of Bartlett Wealth Management which owns this stock. “It doesn’t matter to me because the company has already given really good guidance.”

Thermo Fisher gave a full-year forecast in early February when it announced better-than expected fourth-quarter results. It said it expected to earn $23,70 per share on revenues of $45.3 billion by 2023. This was above the analyst average of $23.07 per share on revenue of $43.8 Billion. The projected profit per share is still below the record of $25.13 in 2021.

Analysts predict that Thermo Fisher will surpass this all-time record again in 2024 with earnings per share at $26.70. The two-year drop has scared investors. Shares have fallen 14% since 2021, as the company faces comparisons with the pandemic boom.

The result: The stock trades now at 24 times projected earnings, which is about the average of its last five years and lower than its pandemic peak of 26.6 reached in December 2021. But consensus estimates predict earnings will continue to rise, reaching more than $30 per share by 2025. Meanwhile, metrics such as free cash flow and returns on equity are still well above pre-pandemic levels. The average analyst’s price target is over $650. This is nearly 15% more than the close on Monday of $574.

Sarembock says, “This stock is one to hold for the long term, and it looks very attractive in terms of value for new buyers now.”

The shares are also attractive in light of the recent market turmoil. Although Thermo Fisher has been classified as a growth company, it is able to generate recurring revenues from loyal customers who often do complex research and development.

Sarembock says: “Nobody else can do it. They need Thermo for their labs.”

In the most recent results, the company showed a confidence that comes from supplying many growing healthcare markets. This is due to an aging populace and more treatment options. Marc Casper, the company’s chief executive, used words like “crushed” and “phenomenal”. The company has also increased its dividend by almost 17% and is guiding for a 7% organic core revenue growth excluding acquisitions.

It’s impossible to discuss Thermo Fisher today without mentioning its strategy. This has allowed it to expand its customer base, geographically, and with new products and business sectors.

Ten years ago, the business was very different and focused on instruments. Douglas Kelly, portfolio manager and partner at Williams Jones Wealth Management which owns this stock, says that if we had a severe recession, the problem could have been much worse. “Today, it’s not a cyclical business unless there is a severe downturn.”

Thermo Fisher managed to make all these deals without increasing its debt ratios. At the end of 2013, net debt to Ebitda (earnings before interest, tax, depreciation, and amortization) was 2.2 times. This is its lowest level since 2013. The total debt to Ebitda is 2.9 times lower than the pre-pandemic period, which dates back to 2013.

The free cash flow for this year is projected to be $7.2 billion, almost double what it was in 2018. This gives the company the flexibility to pursue additional acquisitions and return more cash to its shareholders through dividends and stock buybacks.

Kelly says, “This kind of business is right up our alley.” Good returns and a team of managers who do the right thing with this cash. This is the formula.”

It sounds simple, like being disciplined about your diet and exercising. Both are much easier to say than do. Thermo Fisher has plenty of room for growth until more people learn to follow this advice and overcome other healthcare obstacles.