Thermo Fisher Scientific Inc. (NYSE:TMO)

The period under review demonstrates a consistent pattern of negative economic profit. Net operating profit after taxes (NOPAT) fluctuated over the five-year span, while the cost of capital remained relatively stable. Invested capital generally increased, with a notable decrease in 2024, before rising significantly in 2025. These factors combined to produce ongoing economic losses.

NOPAT Trend

Net operating profit after taxes decreased from US$7,514 million in 2021 to US$6,425 million in 2022, then further declined to US$5,117 million in 2023. A modest recovery was observed in 2024, reaching US$5,400 million, followed by an increase to US$6,467 million in 2025. Despite the 2024 and 2025 improvements, NOPAT did not return to the levels seen in 2021.

Cost of Capital

The cost of capital exhibited slight variability. It increased from 14.28% in 2021 to 14.64% in 2022, remained relatively consistent at 14.61% in 2023 and increased to 14.74% in 2024. A decrease to 14.23% was noted in 2025, but remained above the initial value from 2021.

Invested Capital

Invested capital generally trended upward, increasing from US$79,776 million in 2021 to US$82,814 million in 2022 and US$85,573 million in 2023. A decrease to US$82,071 million occurred in 2024, before a substantial rise to US$94,150 million in 2025. This significant increase in 2025 likely contributed to the continued negative economic profit.

Economic Profit

Economic profit remained negative throughout the period. The losses widened from US$-3,877 million in 2021 to US$-5,696 million in 2022, and further deteriorated to US$-7,384 million in 2023. While the loss lessened slightly to US$-6,695 million in 2024, it increased again to US$-6,934 million in 2025. The consistent negative economic profit indicates that the returns generated from invested capital were insufficient to cover the cost of that capital.

The combination of fluctuating NOPAT, a relatively stable cost of capital, and increasing invested capital resulted in a sustained period of economic losses. The increase in invested capital in 2025, despite a modest NOPAT increase, exacerbated the negative economic profit.

Net income attributable to Thermo Fisher Scientific Inc. and Net Operating Profit After Taxes (NOPAT) both demonstrate fluctuations over the five-year period. While net income shows a relatively stable pattern, NOPAT exhibits a more pronounced decline followed by recovery.

Net Income Trend

Net income attributable to Thermo Fisher Scientific Inc. decreased from US$7,725 million in 2021 to US$6,950 million in 2022. A further decrease was observed in 2023, reaching US$5,995 million. Subsequently, net income increased to US$6,335 million in 2024 and continued to rise to US$6,704 million in 2025, though it did not return to the 2021 level.

NOPAT Trend

NOPAT experienced a more significant decline than net income. Starting at US$7,514 million in 2021, it decreased to US$6,425 million in 2022. The decline accelerated in 2023, falling to US$5,117 million. A modest recovery occurred in 2024, with NOPAT reaching US$5,400 million. The most substantial increase within the observed period occurred between 2024 and 2025, with NOPAT rising to US$6,467 million. Despite this recovery, the 2025 NOPAT figure remains below the 2021 level.

Relationship between Net Income and NOPAT

The values for net income and NOPAT are closely aligned throughout the period, suggesting a limited impact from financing costs or non-operating items. The proportional changes in both metrics are similar, indicating that the core operating profitability is the primary driver of overall profitability. However, the magnitude of the NOPAT decline in 2023 was greater than that of net income, potentially indicating changes in the tax rate or other adjustments between net income and NOPAT.

The recovery in both net income and NOPAT in the later years of the period suggests a potential stabilization or improvement in the company’s operating performance. Further investigation would be required to determine the underlying causes of these fluctuations and the sustainability of the recent recovery.

The provision for income taxes and cash operating taxes exhibited distinct trends between 2021 and 2025. A significant decrease in the provision for income taxes is apparent over the period, while cash operating taxes demonstrate more fluctuation.

Provision for Income Taxes

The provision for income taxes decreased substantially from US$1,109 million in 2021 to US$284 million in 2023. A moderate increase was then observed in 2024, reaching US$657 million, followed by a further decrease to US$547 million in 2025. This represents an overall decline of approximately 50.7% from 2021 to 2025.

Cash Operating Taxes

Cash operating taxes remained relatively stable between 2021 and 2023, fluctuating around US$1,800 million. A notable increase occurred in 2024, with cash operating taxes rising to US$1,946 million. However, a considerable decrease was recorded in 2025, falling to US$1,290 million. The net change from 2021 to 2025 is a decrease of approximately 30.9%.

The divergence between the provision for income taxes and cash operating taxes suggests potential differences in temporary versus permanent tax differences. The substantial reduction in the provision for income taxes, coupled with the fluctuating cash operating taxes, warrants further investigation into the underlying factors driving these trends, such as changes in tax regulations, deferred tax asset realization, or shifts in the composition of taxable income.

Relationship between Provision and Cash Taxes

In 2021, cash operating taxes exceeded the provision for income taxes by US$757 million. This difference narrowed in 2022 to US$1,103 million and further decreased in 2023 to US$1,417 million. The gap widened again in 2024 to US$1,289 million before decreasing significantly in 2025 to US$743 million. This fluctuating difference highlights the impact of timing differences between reported income tax expense and actual cash tax payments.

The observed trends indicate a complex tax profile, and continued monitoring of these figures is recommended to assess potential impacts on future cash flows and overall financial performance.

The invested capital of the company demonstrates an overall increasing trend between 2021 and 2025, though with some fluctuation. Total reported debt & leases and total shareholders’ equity both contribute to this figure, and their individual movements influence the overall invested capital.

Invested Capital Trend

Invested capital increased from US$79,776 million in 2021 to US$82,814 million in 2022, representing a growth of approximately 3.8%. Further growth was observed in 2023, reaching US$85,573 million. A slight decrease occurred in 2024, with invested capital falling to US$82,071 million. However, a significant increase is noted in 2025, with invested capital reaching US$94,150 million.

Debt & Leases

Total reported debt & leases remained relatively stable between 2021 and 2023, fluctuating around US$36 billion. A decrease was observed in 2024, falling to US$32,775 million. This downward trend was reversed in 2025, with debt & leases increasing substantially to US$40,855 million.

Shareholders’ Equity

Total shareholders’ equity exhibited consistent growth throughout the period. It increased from US$40,793 million in 2021 to US$43,978 million in 2022, US$46,735 million in 2023, and US$49,584 million in 2024. This growth continued into 2025, reaching US$53,407 million. The consistent increase in shareholders’ equity contributes to the overall growth in invested capital.

The increase in invested capital in 2025 is primarily driven by a substantial rise in debt & leases, despite continued growth in shareholders’ equity. The dip in invested capital in 2024 is attributable to the decrease in debt & leases, partially offset by the continued growth in shareholders’ equity. These fluctuations suggest potential shifts in the company’s capital structure and financing strategies.

The economic spread ratio demonstrates a consistent pattern of negative values over the five-year period, indicating that the company’s returns on invested capital are consistently below its cost of capital. The magnitude of this underperformance has generally increased over time, before showing a slight moderation in the most recent year.

Economic Spread Ratio Trend

The economic spread ratio declined from -4.86% in 2021 to -8.63% in 2023, representing a worsening of economic value creation. This suggests an increasing gap between the cost of capital and the returns generated from invested capital. A slight improvement is observed in 2024 and 2025, with the ratio moving to -8.16% and -7.36% respectively, though it remains negative.

The negative economic profit figures corroborate the negative economic spread ratio. Economic profit consistently decreased from a loss of US$3,877 million in 2021 to a loss of US$7,384 million in 2023. While the loss moderated to US$6,695 million in 2024 and US$6,934 million in 2025, it remained substantial.

Invested Capital Trend

Invested capital generally increased from US$79,776 million in 2021 to US$94,150 million in 2025. However, the increase was not consistent year-over-year, with a decrease observed between 2023 and 2024. This suggests potential shifts in capital allocation strategies or asset base.

The combination of increasing invested capital and a consistently negative economic spread ratio indicates that the company is deploying more capital into ventures that are not generating returns sufficient to cover their cost. The slight improvement in the economic spread ratio in 2024 and 2025, despite continued negative economic profit, suggests that recent investments or operational changes may be beginning to have a modest positive effect, but further monitoring is warranted to confirm a sustained trend.

The economic profit margin demonstrates a consistent pattern of negative values over the five-year period, indicating the company’s returns are not exceeding its cost of capital. A clear downward trend is observed in the economic profit margin from 2021 to 2023, followed by a slight stabilization in the subsequent two years.

Economic Profit Margin Trend

The economic profit margin decreased from -9.89% in 2021 to -17.23% in 2023, representing a substantial decline over three years. This suggests a worsening ability to generate returns above the cost of capital. The margin then experienced a modest improvement, reaching -15.61% in 2024 and -15.56% in 2025, though it remained significantly negative.

Relationship with Revenues

While revenues generally increased over the period, rising from US$39,211 million in 2021 to US$44,556 million in 2025, this revenue growth did not translate into improved economic profitability. The continued negative economic profit, despite revenue increases, suggests that the cost of capital is growing at a faster rate than the returns generated by revenue, or that operational inefficiencies are impacting profitability.

Economic Profit

The absolute value of economic profit also increased from US$-3,877 million in 2021 to US$-7,384 million in 2023, mirroring the worsening economic profit margin. The subsequent years saw a slight decrease in the absolute value of economic profit, aligning with the stabilization of the economic profit margin, but remaining at a substantial negative level.

In summary, the company consistently failed to generate economic profit during the analyzed period. The economic profit margin deteriorated significantly through 2023, and while it showed a slight recovery in the following two years, it remained substantially negative, indicating continued underperformance relative to its cost of capital.