Thermo Fisher (TMO), the nation's biggest laboratory supply company, reliably churns out cash in good times and bad.
TMO Stock Chart by YCharts
At the same time that Thermo profit were under a bit of pressure from the economy's meltdown, the Massachusetts company used its impressive free cash flow to go on a shopping spree over the past couple years.
It paid a combined $1.25 billion to snap up about a dozen smaller companies. Then in December it announced a richly priced $2.1 billion cash deal for California instrument maker Dionex (DNEX).
Thermo also spent a billion dollars last year buying back its own shares, and has authorization to spend a bit more on Thermo buybacks again this year. Despite all the money going out the door, both major credit rating concerns recently bumped the company's investment-grade debt a notch higher.
And Thermo's PE ratio, after slumming for a while in the wake of the market's crash, has lately been climbing back up to its historically plush levels.
TMO Stock Chart by YCharts
Until very recently, YCharts Pro considered Thermo cheap. Now, with the stock's recovery so well advanced, YCharts says it is correctly priced.
YCharts is probably being overly conservative. Despite its recent rebound, the stock could move significantly higher. Stable end markets and cost-cutting efforts let Thermo deliver solid profits through tough times. Now, as markets strengthen, future profit margins — helped by an offshore growth strategy and the recent acquisitions — are likely to exceed earlier peak-profit levels.