[MONEY GOLEM #6] It's not just about selling equipment — Thermo Fisher (TMO), the king that holds the 'water meter' of the laboratory
*This article is not intended to solicit investment. Please make your own investment decisions.
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Hello everyone! This is MONEY GOLEM.
If you bookmark this now, it will be easier to find later! 😊
I have introduced semiconductor manufacturing equipment companies so far, but today I am going to take a leap into **a different field**.
Yes, it is **Thermo Fisher Scientific (TMO)**.
Most people are probably thinking, "Thermo Fisher? I've never heard of them." But in fact, **if you have ever worked in a science laboratory, you have definitely been helped by this company**.
I also used electron microscopes, mass spectrometers, and various reagents almost every day for battery material analysis. Before I knew it, my desk was **covered in Thermo Fisher products**.
And what I felt keenly on the front lines is today's theme.
"This company doesn't just sell equipment and walk away. Once the equipment is installed, there is a mechanism where money keeps flowing in 'forever' through consumables, reagents, and maintenance."
Exactly as you say—**once they get you to buy, revenue is generated continuously through regular inspections and consumables**. This is truly powerful.
Today, I will dissect this hidden king that holds the **'water meter' of the laboratory**!
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## Table of Contents
1. Chapter 1 | What does this company do?
2. Chapter 2 | Why the attention now?
3. Chapter 3 | Checking the FCF earning power
4. Chapter 4 | Competitive advantage analysis from the perspective of the development site
5. Chapter 5 | Summary and points for investment decisions
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## Chapter 1 | What does this company do? 🏭
In a nutshell, Thermo Fisher is "**the world's largest supplier of equipment, reagents, and services to entire scientific laboratories**."
Pharmaceutical companies, biotech ventures, universities, hospital laboratories, food and environmental testing agencies... **every site where science is conducted** is a customer.
If we compare what they sell to the human body👇
- **Analytical instruments (mass spectrometers, electron microscopes, genetic analyzers, etc.)** = The laboratory's "**eyes and brain**"
- **Reagents and consumables (plastic containers, reagents, antibodies, etc.)** = The experiment's "**blood and fuel**"
- **Services (maintenance, inspection, contract research CRO)** = The laboratory's "**family doctor**"
### Why your focus is spot on
This is the most important point today.
Thermo Fisher's business is a **'printer and ink' model** (= Gillette model).
- **Equipment (printer unit)** … First, get it into the laboratory
- **Reagents/consumables (ink)** … Used up with every experiment → **Bought forever**
- **Maintenance services** … As long as the equipment is running, money comes in from regular inspections
In fact, the breakdown of FY2025 revenue is as follows👇
- **Consumables: approx. $18.7 billion (approx. 42%)**
- **Services: approx. $18.6 billion (approx. 42%)**
- **Equipment: approx. $7.3 billion (approx. 16%)**
Surprisingly, **consumables + services account for about 84% of revenue!** Rather than "one-off sales" of equipment, **recurring revenue that accumulates the more it is used is overwhelmingly larger**. This is the true nature of TMO.
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## Chapter 2 | Why pay attention now? ⚡
### Tailwind ①: Long-term growth of drug discovery and biopharmaceuticals
The current stars of pharmaceuticals are new biopharmaceuticals such as **antibody drugs, cell and gene therapies, and GLP-1 (weight-loss drugs)**.
The research, development, and manufacturing of these require **vast amounts of analysis and reagents**. The more drug discovery heats up, the more Thermo Fisher's equipment and consumables sell. **The person who sells pickaxes makes the most money in a gold rush**, that's the structure.
### Tailwind ②: Aging population and diagnostic demand
With the global aging population, the demand for **testing and diagnosis** of diseases will continue to increase. Thermo Fisher is also deeply embedded in the field of diagnostics.
### Tailwind ③: Inherently 'recession-proof'
This is quietly impressive. Consumables and reagents are like the **'utility bills' of research**. Even if the economy is bad, laboratories cannot stop their experiments, so they keep buying.
In fact, even in the phase where the COVID-19 special demand faded and revenue temporarily decreased, **the ability to generate cash hardly wavered** (I will prove this in Chapter 3).
### FY2025 in numbers
- **Revenue: $44.6 billion (approx. 6.7 trillion yen, +4%)**
- **Adjusted Operating Margin: 22.7%**
- **Recurring Revenue (Consumables + Services): Approx. 84% of revenue**
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## Chapter 3 | Checking the FCF earning power 📊
What I prioritize most in investing is the "**FCF margin (cash conversion rate)**". My basic stance is that a company that doesn't have cash left over even if it has sales is no good.
### Revenue fluctuated wildly due to the COVID-19 special demand
| Fiscal Year | Revenue | YoY | Note |
|--------|--------|--------|------|
| 2021 | $39.2 billion | +22% | COVID testing demand |
| 2022 | $44.9 billion | +15% | Peak demand |
| 2023 | $42.9 billion | -5% | Demand drop-off |
| 2024 | $42.9 billion | +0% | Bottoming out |
| 2025 | **$44.6 billion** | +4% | Re-growth in core business |
### But, the FCF margin has been 'consistently stable'
This is the true essence of the recurring revenue model👇
| Fiscal Year | FCF Margin (approx.) | Rating |
|--------|------|------|
| 2021 | Approx. 17% | 🟢 Good |
| 2022 | Approx. 15% | 🟢 Good |
| 2023 | Approx. 16% | 🟢 Good |
| 2024 | Approx. 17% | 🟢 Good |
| 2025 | **Approx. 14%** | 🟡 Monitor (explained below) |
**Even though revenue fluctuated wildly due to COVID, the FCF margin was consistently 14-17%.** This is proof that the 'recurring revenue' from consumables and services supports the foundation. It is a **'water meter type' business that generates cash stably'** without fluctuating violently with market conditions like semiconductor manufacturers.
### The 'yellow reason' why FY2025 dipped slightly 🟡
The reason the FCF margin for FY2025 dropped to about 14% is because **it was a year in which large-scale investments and M&A were executed**.
Thermo Fisher invested **about $16.5 billion in capital** in FY2025 alone (of which about $13 billion was for M&A and about $3.6 billion for shareholder returns). Because they allocated money to production capacity expansion and acquisitions, FCF temporarily decreased.
This is **'aggressive investment to increase future recurring revenue'**. Even in my strict evaluation, this dip is rated as ◎ (actually positive).
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## Chapter 4 | Competitive advantage analysis from the perspective of the development site 🔬
This is the core of today's article.
Why is Thermo Fisher so strong? As someone who was surrounded by this company's equipment in the lab, I will list three reasons.
### Strength 1: The 'Printer and Ink' model of recurring revenue 🖨️
I've said it many times, but this is their strongest weapon. **Once the equipment is installed, you are billed forever for consumables, reagents, and maintenance.**.
For a laboratory, reagents and consumables are 'fuel' that disappears with every experiment. **The more you use them, the more money goes to Thermo Fisher.** The stability of having 84% of revenue coming from recurring sources is something a company that only sells one-off products can never imitate.
### Strength 2: The 'abnormally high' switching cost 🔒
This is a critical point that only those on the front lines understand.
In the world of pharmaceuticals and diagnostics, **once you have 'validated' a measurement method using specific equipment and reagents, you cannot easily switch to another company's products.**.
To switch, you would need to **start the measurement method over from scratch and re-apply to regulatory authorities**—a daunting task. That is why the front lines continue to use Thermo Fisher even if it is somewhat expensive. **Regulations act as a wall that prevents switching.**
I have also experienced many situations where I had to say, 'I can't compare the data unless I use this specific equipment and these reagents for this analysis.' Once you get hooked, you can't get out.
### Strength 3: 'Everything you need' one-stop shop & M&A machine 🛒
Thermo Fisher offers **everything needed for research in their catalog, from equipment to reagents and even plasticware.** It is convenient for researchers to consolidate their orders with one supplier.
Furthermore, this company is a **genius at growing through acquisitions (M&A).** They buy companies with superior technology one after another and use their own sales network to profit from them. It is a snowball effect where scale begets more scale.
🔬 **What I felt on the front lines as a production technology developer**
The equipment is expensive, but everyone keeps using it because of the 'reliability of the data' and the 'peace of mind of the support.' And before you know it, you are paying an incredible amount annually for consumables. **It's a business like a 'water tap that charges you every time you turn it.'** As a customer, I have to say, it is a truly well-crafted system.
### 5-Axis Evaluation of Barriers to Entry (1-5 stars)
| Axis | Rating | Comment |
|----|------|---------|
| 1. Uniqueness of materials/technology | ★★★☆☆ | Wins on 'product range and recurring revenue' rather than individual technology |
| 2. Complexity of manufacturing process | ★★★☆☆ | Comprehensive strength is greater than individual equipment |
| 3. Customer approval/switching costs | ★★★★★ | Validation = Regulations act as a wall against switching |
| 4. Capital intensity | ★★★☆☆ | Growth through M&A, equipment is moderate |
| 5. Regulations/Certifications (GMP, FDA, etc.) | ★★★★☆ | Pharmaceutical/diagnostic regulations block new entrants |
The point is that Thermo Fisher's moat lies in **'recurring revenue + high switching costs + scale.'** It is not about flashy individual technology, but the 'system that you can't get out of once you're in' itself that is their strength.
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## Chapter 5 | Summary & Key Points for Investment Decisions 🎯
### Current stock price level (as of May 2026)
| Metric | Value |
| Dividend Yield | **Approx. 0.42%** |
| ROE | **Approx. 13.5%** |
| Adjusted Operating Margin | **22.7%** |
### Summary of Investment Judgment
| Item | Rating | Reason |
|------|------|------|
| **FCF Margin** | ○〜◎ | Long-term stability at 14-17%, built on recurring revenue |
| **Competitive Advantage (Moat)** | Very strong | Recurring revenue + switching costs + scale |
| **Investment Stance** | Suitable for long-term holding | Can ride the long-term growth of drug discovery and diagnostics |
### I will also write honestly about the risks
- **The reaction to the COVID-19 special demand has not completely faded.** Need to observe whether the core business growth rate meets market expectations
- **Depends on drug discovery and bio-research budgets.** If pharmaceutical companies and university research budgets are tightened, demand for consumables will also slow down
- **Growth dependent on M&A.** If acquisitions are overpaid for or integration fails, it will be a blow. Debt is also prone to increase
- **ROE of 13.5% is surprisingly low.** In some respects, the massive goodwill (history of acquisitions) is inflating equity
### MoneyGolem's Conclusion
> **'Thermo Fisher is the infrastructure of science. It gets in with equipment and earns forever through consumables and services. Whoever holds the water meter of the laboratory is strong even in a recession.'**
As someone who was surrounded by this company's equipment in the laboratory, I can state this definitively.
The strength of Thermo Fisher lies not in its cutting-edge technology itself, but in its **'mechanism for recurring revenue that you cannot escape once you enter.'** Your focus — **the strength of generating recurring revenue through regular maintenance and consumables** — hits the very essence of this company.
Moreover, compared to semiconductor stocks (PER 40-60x), it is **relatively undervalued at a PER of about 25x**. It's understated, but you can ride the long-term theme of drug discovery and diagnostics with stable cash. I highly value it as a **core candidate for long-term holding**.
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The next 'MONEY GOLEM Production Technology Stock Series' will be...
**[Scheduled for 7th] Danaher (DHR)** — The 'other emperor of life sciences' that stands shoulder to shoulder with Thermo Fisher, and the secret of its management method, 'DBS'
Look forward to it!
It would be encouraging if you could like, bookmark, or review this 🙇
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**Recommended tags:** #Investment #USStocks #ThermoFisher #TMO #LifeSciences #Bio #DrugDiscovery #FCF #LongTermInvestment #MONEYGOLEM
