Stocks for the Long Run: Thermo Fisher Scientific vs. the S&P 500

Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "you'll be buying into a wonderful industry, which in effect is all of American industry," he says.

But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how individual stocks have performed against the broad S&P 500.

Step on up, Thermo Fisher Scientific (NYS: TMO) .

Thermo Fisher Scientific shares have outperformed the S&P 500 over the past quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 10.2% a year, compared with 9.7% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In Thermo Fisher Scientific, it'd be worth $22,500.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 30% of Thermo Fisher Scientific's returns. For the S&P, dividends account for 39% of total returns.

Now have a look at how Thermo Fisher Scientific earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Good outperformance here, too. Since 1995, Thermo Fisher Scientific's earnings per share have grown by an average of 7.8% a year, compared with 6% a year for the broader index.

What's that meant for valuations? Thermo Fisher Scientific has traded for an average of 40 times earnings since 1987 -- well above the 24 times earnings for the broader S&P 500.

Through it all, shares have been strong performers over the past quarter-century.

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Thermo Fisher Scientific with a five-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add Thermo Fisher Scientific to My Watchlist.

The amount of data we store every year is growing by a mind-boggling 60% annually! To make sense of this trend and pick out a winner, The Motley Fool has compiled a new report called "The Only Stock You Need to Profit From the NEW Technology Revolution." The report highlights a company that has gained 300% since first recommended by Fool analysts but still has plenty of room left to run. Thousands have requested access to this special free report, and now you can access it today at no cost. To get instant access to the name of this company transforming the IT industry, click here -- it's free.

The article Stocks for the Long Run: Thermo Fisher Scientific vs. the S&P 500 originally appeared on Fool.com.

Fool contributor Morgan Housel and The Motley Fool have no positions in the stocks mentioned above. Motley Fool newsletter services recommend Thermo Fisher Scientific. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.