Nanotechnology is emerging rapidly, outpacing other technologies at a breakneck speed, with potential uses in various sectors, including computer and electronics, healthcare, cosmetics, textile, energy, and agriculture, to mention a few. Interestingly, its growing use in the healthcare sector has enabled researchers to develop more innovative and effective drugs.
Rapid developments in healthcare technology and growing government spending on biotechnology and pharmaceutical R&D are anticipated to drive the nanotech sector’s growth. The global nanotechnology market is expected to reach $126.8 billion by 2027, growing at a 12.9% CAGR.
Given the accelerating growth of the nanotechnology market, we think it may be prudent to bet on fundamentally strong nanotech companies Thermo Fisher Scientific Inc. (TMO) and Onto Innovations Inc. (ONTO), which have the potential to deliver huge returns to investors in the coming months.
Thermo Fisher Scientific Inc. (TMO)
TMO provides scientific instrumentation and software services. It develops and distributes various products under the brand names Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, and Unity Lab Services. Life Sciences Solutions; Analytical Instruments; Specialty Diagnostics; and Laboratory Products and Services are the four segments through which the Waltham, Mass., company operates.
This month, TMO opened a new cGMP plasmid DNA manufacturing facility in Carlsbad, California, to meet the rapidly increasing demand for plasmid DNA-based therapies and mRNA-based vaccines. Because plasmid DNA is being used increasingly as a therapeutic option in gene treatments and vaccinations, the company is well-positioned to see substantial growth in revenues in the coming months.
During the second quarter, ended July 3, 2021, TMO’s revenue increased 34.1% year-over-year to $9.27 billion. The company’s operating income increased 55.5% year-over-year to $2.16 billion over this period. Its net income increased 58.1% year-over-year to $1.83 billion, while its EPS grew 59% from the prior-year quarter to $4.61.
A $22.12 consensus EPS estimate for the current year represents a 13.1% improvement year-over-year. The $35.66 billion consensus revenue estimate for 2021 represents a 10.7% increase from the same period last year. The stock has gained 29.7% over the past year and 13.4% year-to-date.
TMO's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TMO is also graded an A for Growth. In addition, , within the Medical – Diagnostics/Research industry, it is ranked #9 of 55 stocks.
To see more of TMO’s component grades, click here.
Click here to checkout our Healthcare Sector Report for 2021
Onto Innovation Inc. (ONTO)
ONTO is a manufacturer of semiconductor equipment and software technologies. The Flanders, N.J.-based company provides a range of technologies for wafer production, front-end process management, and advanced semiconductor packaging lithography. In addition, the company offers overlay metrology for controlling lithography and etch operations in the compound semiconductor sector.
During the first quarter, ended March 27, 2021, ONTO's non-GAAP revenue increased 21% year-over-year to $169.28 million. The company’s non-GAAP operating income increased 82.6% year-over-year to $41.87 million. Its non- GAAP net income increased 84.1% year-over-year to $36.34 million, while its non-GAAP EPS increased 87.2% year-over-year to $0.73 over this period.
ONTO is expected to witness 29% revenue growth for the current year. Its EPS is estimated to increase 64.8% year-over-year to $3.18 in 2021. Over the past year, ONTO's stock has gained 91.1%. Furthermore, it has gained 41% year-to-date.
ONTO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Growth, Momentum, and Quality. In the B-rated Semiconductor & Wireless Chip same industry, it is ranked #35 of 99 stocks.
In total, we rate ONTO on eight different levels. Beyond what we've stated above, we have also given ONTO grades for Stability, Sentiment, and Value. Get all the ONTO ratings here.
Click here to checkout our Semiconductor Industry Report for 2021
TMO shares were trading at $532.31 per share on Thursday afternoon, up $4.04 (+0.76%). Year-to-date, TMO has gained 14.41%, versus a 18.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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