Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Thermo Fisher Scientific Inc. (NYSE:TMO)

Economic Value Added (EVA)

Advanced level

Economic Profit

Thermo Fisher Scientific Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 3,522  2,921  925  1,743  1,616 
Cost of capital2 12.26% 12.07% 11.35% 11.20% 11.42%
Invested capital3 52,731  51,938  51,727  43,884  38,845 
 
Economic profit4 (2,942) (3,347) (4,948) (3,172) (2,821)

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,52212.26% × 52,731 = -2,942

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Thermo Fisher Scientific Inc.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Thermo Fisher Scientific Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income 3,696  2,938  2,225  2,022  1,975 
Deferred income tax expense (benefit)1 (499) (474) (1,696) (639) (600)
Increase (decrease) in allowance for doubtful accounts2 (15) 32  (4)
Increase (decrease) in LIFO reserve3
Increase (decrease) in standard product warranty obligations4 22  (2)
Increase (decrease) in accrued restructuring costs5 (46) 41  (22)
Increase (decrease) in equity equivalents6 (554) (454) (1,648) (568) (624)
Interest expense 676  667  592  470  415 
Interest expense, operating lease liability7 30  23  21  18  16 
Adjusted interest expense 706  690  613  488  431 
Tax benefit of interest expense8 (148) (145) (214) (171) (151)
Adjusted interest expense, after taxes9 557  545  398  317  280 
(Gain) loss on marketable securities —  —  (1) — 
Interest income (224) (137) (81) (48) (31)
Investment income, before taxes (224) (137) (82) (48) (31)
Tax expense (benefit) of investment income10 47  29  29  17  11 
Investment income, after taxes11 (177) (108) (53) (31) (20)
(Income) loss from discontinued operations, net of tax12 —  — 
Net operating profit after taxes (NOPAT) 3,522  2,921  925  1,743  1,616 

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in LIFO reserve. See details »

4 Addition of increase (decrease) in standard product warranty obligations.

5 Addition of increase (decrease) in accrued restructuring costs.

6 Addition of increase (decrease) in equity equivalents to net income.

7 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 738 × 4.00% = 30

8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 706 × 21.00% = 148

9 Addition of after taxes interest expense to net income.

10 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 224 × 21.00% = 47

11 Elimination of after taxes investment income.

12 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Thermo Fisher Scientific Inc.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Thermo Fisher Scientific Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Provision for (benefit from) income taxes 374  324  201  (1) (44)
Less: Deferred income tax expense (benefit) (499) (474) (1,696) (639) (600)
Add: Tax savings from interest expense 148  145  214  171  151 
Less: Tax imposed on investment income 47  29  29  17  11 
Cash operating taxes 974  914  2,083  792  696 

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Thermo Fisher Scientific Inc.’s cash operating taxes decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Invested Capital

Thermo Fisher Scientific Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Short-term obligations and current maturities of long-term obligations 676  1,271  2,135  1,256  1,053 
Long-term obligations, excluding current maturities 17,076  17,719  18,873  15,372  11,474 
Operating lease liability1 738  709  734  649  571 
Total reported debt & leases 18,490  19,699  21,742  17,277  13,098 
Shareholders’ equity 29,675  27,586  25,413  21,539  21,350 
Net deferred tax (assets) liabilities2 1,619  1,832  2,266  2,175  2,215 
Allowance for doubtful accounts3 102  117  109  77  70 
LIFO reserve4 39  34  31  29  28 
Standard product warranty obligations5 93  92  87  78  56 
Accrued restructuring costs6 34  80  76  72  31 
Equity equivalents7 1,887  2,155  2,569  2,431  2,400 
Accumulated other comprehensive (income) loss, net of tax8 2,679  2,498  2,003  2,636  1,997 
Adjusted shareholders’ equity 34,241  32,239  29,985  26,607  25,747 
Invested capital 52,731  51,938  51,727  43,884  38,845 

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of LIFO reserve. See details »

5 Addition of standard product warranty obligations.

6 Addition of accrued restructuring costs.

7 Addition of equity equivalents to shareholders’ equity.

8 Removal of accumulated other comprehensive income.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Thermo Fisher Scientific Inc.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Thermo Fisher Scientific Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 123,302  123,302  ÷ 142,706  = 0.86 0.86 × 13.89% = 12.00%
Debt obligations3 18,666  18,666  ÷ 142,706  = 0.13 0.13 × 2.33% × (1 – 21.00%) = 0.24%
Operating lease liability4 738  738  ÷ 142,706  = 0.01 0.01 × 4.00% × (1 – 21.00%) = 0.02%
Total: 142,706  1.00 12.26%

Based on: 10-K (filing date: 2020-02-26).

1 US$ in millions

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 103,398  103,398  ÷ 123,143  = 0.84 0.84 × 13.89% = 11.66%
Debt obligations3 19,036  19,036  ÷ 123,143  = 0.15 0.15 × 3.18% × (1 – 21.00%) = 0.39%
Operating lease liability4 709  709  ÷ 123,143  = 0.01 0.01 × 3.18% × (1 – 21.00%) = 0.01%
Total: 123,143  1.00 12.07%

Based on: 10-K (filing date: 2019-02-27).

1 US$ in millions

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 83,804  83,804  ÷ 106,161  = 0.79 0.79 × 13.89% = 10.97%
Debt obligations3 21,623  21,623  ÷ 106,161  = 0.20 0.20 × 2.83% × (1 – 35.00%) = 0.37%
Operating lease liability4 734  734  ÷ 106,161  = 0.01 0.01 × 2.83% × (1 – 35.00%) = 0.01%
Total: 106,161  1.00 11.35%

Based on: 10-K (filing date: 2018-02-28).

1 US$ in millions

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 61,557  61,557  ÷ 79,182  = 0.78 0.78 × 13.89% = 10.80%
Debt obligations3 16,976  16,976  ÷ 79,182  = 0.21 0.21 × 2.78% × (1 – 35.00%) = 0.39%
Operating lease liability4 649  649  ÷ 79,182  = 0.01 0.01 × 2.78% × (1 – 35.00%) = 0.01%
Total: 79,182  1.00 11.20%

Based on: 10-K (filing date: 2017-02-28).

1 US$ in millions

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 51,740  51,740  ÷ 64,996  = 0.80 0.80 × 13.89% = 11.06%
Debt obligations3 12,685  12,685  ÷ 64,996  = 0.20 0.20 × 2.75% × (1 – 35.00%) = 0.35%
Operating lease liability4 571  571  ÷ 64,996  = 0.01 0.01 × 2.75% × (1 – 35.00%) = 0.02%
Total: 64,996  1.00 11.42%

Based on: 10-K (filing date: 2016-02-25).

1 US$ in millions

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Thermo Fisher Scientific Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (2,942) (3,347) (4,948) (3,172) (2,821)
Invested capital2 52,731  51,938  51,727  43,884  38,845 
Performance Ratio
Economic spread ratio3 -5.58% -6.44% -9.57% -7.23% -7.26%
Benchmarks
Economic Spread Ratio, Competitors4
Becton, Dickinson & Co. -6.51% -7.53% -4.73% -5.59% -5.28%
Boston Scientific Corp. -5.48% 0.67% -5.75% -8.35% -14.58%
Danaher Corp. -6.11% -4.44% -4.75% -5.28% -3.65%
Edwards Lifesciences Corp. 18.66% 14.53% 12.00% 11.83% 12.11%
Intuitive Surgical Inc. 28.84% 34.06% 31.70% 23.69% 21.18%
Medtronic PLC -1.09% -4.81% -3.26% -3.02% -4.79%
Stryker Corp. 1.43% 1.40% -1.93% 1.49% 4.18%
UnitedHealth Group Inc. 13.07% 11.58% 9.71% 6.57% 4.05%

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,942 ÷ 52,731 = -5.58%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Thermo Fisher Scientific Inc.’s economic spread ratio improved from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

Thermo Fisher Scientific Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (2,942) (3,347) (4,948) (3,172) (2,821)
Revenues 25,542  24,358  20,918  18,274  16,965 
Performance Ratio
Economic profit margin2 -11.52% -13.74% -23.65% -17.36% -16.63%
Benchmarks
Economic Profit Margin, Competitors3
Becton, Dickinson & Co. -17.02% -22.28% -13.54% -9.96% -12.05%
Boston Scientific Corp. -10.38% 1.09% -8.20% -12.09% -23.88%
Danaher Corp. -19.84% -9.98% -11.03% -13.22% -7.70%
Edwards Lifesciences Corp. 15.87% 11.33% 9.98% 10.38% 10.95%
Intuitive Surgical Inc. 21.37% 23.17% 17.02% 18.06% 15.44%
Medtronic PLC -2.55% -11.27% -8.70% -8.07% -18.60%
Stryker Corp. 2.24% 2.15% -2.71% 2.24% 5.15%
UnitedHealth Group Inc. 4.18% 3.62% 3.04% 2.03% 1.48%

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -2,942 ÷ 25,542 = -11.52%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Thermo Fisher Scientific Inc.’s economic profit margin improved from 2017 to 2018 and from 2018 to 2019.