This Healthcare Company Is A Better Pick Over Honeywell Stock

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we think that Thermo Fisher Scientific Stock (NYSE:TMO) is currently . is a better pick than honeywell stock stock (NYSE:HON), despite being the more expensive of the two, is trading at 6.7x trailing revenue compared to 4.1x for Honeywell. Even if we look at the P/EBIT ratio, TMO stock appears to be more expensive with a 25x P/EBIT ratio compared to 22x for HON stock. This gap in valuation can be attributed to Thermo Fisher Scientific’s improved revenue growth and higher profitability, a trend that is likely to continue, as we discuss in the sections below. We compare multiple factors such as historical revenue growth, returns and valuation multiples in an interactive dashboard analysis Honeywell vs Thermo Fisher Scientific, Which stock is the better bet? The excerpts of the analysis are summarized below. We compare these two companies considering that they have similar revenue bases.

1. Thermo Fisher Scientific’s Revenue Growth Is Strong

  • Both companies managed to see sales growth after the pandemic, but Thermo Fisher Scientific has seen much faster and more consistent revenue growth over the years. Thermo Fisher Scientific’s sales have increased from $18.3 billion in 2016 to $39.1 billion over the past twelve months, while Honeywell’s revenue has declined from $39.3 billion to $34.6 billion in the same period, partly due to the division of its transportation business. Because of that, which grossed about $3. billion in annual sales by 2018.
  • Thermo Fisher Scientific’s recent increase in revenue can be attributed to an increase in sales of COVID-19 testing and treatment products. The growth in sales has been helped by continued market share gains for its devices. Note that once the equipment is installed, it also generates recurring revenue in the form of after sales service and consequently the demand for consumables.
  • Given Honeywell has risks to its aerospace business, airlines are one of the worst-hit sectors during the pandemic, and this has impacted the company’s overall performance since the start of the pandemic. Despite lower sales for aerospace, the company has posted overall revenue growth so far this year, led by gains in its other sectors — building technologies, performance materials and safety and productivity solutions. Our Honeywell Revenue The dashboard provides more details on the segment of the company.
  • Now, Thermo Fisher Scientific’s revenue growth of 37% over the past twelve-month period is much better than Honeywell’s growth of just 4.2%. Looking at a slightly longer time frame, Thermo Fisher Scientific has outperformed Honeywell with its last three-year revenue CAGR of 16%, compared to -7% for Honeywell.
  • Looking ahead, with economies now opening up, demand for air travel will pick up after the pandemic, and airlines will have more cushion to spend on new planes, which bodes well for Honeywell.
  • That said, Thermo Fisher Scientific’s revenue is expected to grow at a faster pace than Honeywell’s. The table below summarizes our revenue expectation for HON and TMO over the next three years, and points to a CAGR of 11.3% for Thermo Fisher Scientific compared to a CAGR of 3.6% for Honeywell.
  • Note that we have different methods for companies negatively impacted by COVID, and for companies that have not been impacted or positively impacted by COVID, while forecasting future revenue. For companies negatively impacted by COVID, we consider the quarterly revenue recovery trajectory to estimate recovery of the pre-Covid revenue run rate, and beyond the recovery point, we consider a return to normal conditions under COVID-19. Let us apply the average annual growth observed in the first three years. , For companies reporting positive revenue growth during COVID, we consider average annual growth before Covid, which has a certain weight for growth during COVID and the previous twelve months.

2. Thermo Fisher Scientific is more profitable

  • Thermo Fisher Scientific’s 27% operating margin is better than Honeywell’s 18% over the past twelve-month period.
  • Even if we look at recent margin growth, Thermo Fisher Scientific stands ahead, with margins up 8% over the past twelve months versus the last three years, compared to just 1% for Honeywell.
  • we guess Honeywell’s Evaluation About $248 per share which is 15% higher than the current market price of $216. This represents a P/EBITDA multiplier of 20x for the company based on our forecast Honeywell’s EBITDA for the current financial year.

3. Net Of It All

  • We see revenue growth in recent quarters to be better and more profitable for Thermo Fisher Scientific. However, Honeywell is trading at a comparatively low valuation.
  • Looking at future prospects, using P/S as the basis, due to high volatility in P/E and P/EBIT, we believe TMO is currently the better option. The table below summarizes our revenue and return expectation for HON and TMO over the next three years, and points to an expected return of -3% for HON over the period. A good 19% expected return for TMO, which means investors are better off. Stop buying TMO on HON, based on our dashboard – Honeywell vs Thermo Fisher Scientific – which provides more detail about how we arrive at these numbers.
  • Note that due to the spread of more infectious virus forms, COVID-19 is proving to be more difficult than initially thought, and infections in many geographies, including the US and Europe, are higher than a few months ago. Concerns about Omicron have largely rocked the markets. If the new version causes any disruption to economic growth as a result of the recent large increase in COVID-19 cases that we are seeing now, it is likely to impact sales growth for many companies, including Honeywell.

While TMO stock may outperform HON, the COVID-19 crisis has created several pricing discontinuities that could provide lucrative trading opportunities. For example, you’d be surprised how intuitive it is to approach stock valuations. Honeywell vs Kauravo,

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