A revolution is going on right under our noses. Research organizations are discovering more about the human genome than ever before. Their findings are leading to prescription drugs tailored to fight genetic diseases, many of which have had no effective treatment in the past. And two companies are leading the way in providing the tools that make this revolution possible: Illumina (NASDAQ:ILMN) and Thermo Fisher Scientific (NYSE:TMO)

Illumina's shares suffered in 2016, but this year has been great for the genomic sequencing company's stock so far. Thermo Fisher Scientific did well last year and is off to a pretty good start in 2017. Which stock is the better buy now? Here's how Illumina and Thermo Fisher compare.


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The case for lllumina

One of the strongest arguments in favor of Illumina is that the company has a genetic technology equivalent of a razor-and-blades business model. Consumables, which include chemical reagents used by Illumina's sequencing systems, accounted for roughly two-thirds of the company's total revenue last year.

Another good case for buying Illumina's stock is the company's track record for innovation. Illumina markets DNA sequencing systems for any scale. Its benchtop sequencing systems -- MiniSeq, MiSeq, and NextSeq -- handle lower-throughput requirements. HiSeq and HiSeq X sequencing systems target production-scale needs.

Illumina recently unveiled its latest platform -- NovaSeq. The new product line is the most powerful sequencing system Illumina has developed. The company's HiSeq X system paved the way to deliver genomic sequencing for $1,000 or lower. Illumina thinks NovaSeq will enable sequencing costs to eventually go down to $100.

Although Illumina didn't achieve significant earnings growth in 2016, NovaSeq should help the company perform much better in the years ahead. Wall Street analysts project the company will grow earnings by 11.5% annually over the next five years. 

The case for Thermo Fisher Scientific

If you're looking for a company with a broad scope covering nearly every area of medical research, Thermo Fisher Scientific might be just what you need. The company has four business segments: life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and services.

Thermo Fisher's life sciences solutions segment competes directly with Illumina in the sequencing systems and microarrays markets, but it also sells additional products and services beyond what Illumina provides. The segment generated revenue of $4.98 billion in 2016 -- up 12% over the prior year.

The company's largest segment in terms of revenue is laboratory products and services. This unit made $7.03 billion last year. The analytical instruments segment, which markets a broad array of products and services for laboratory and field research, generated revenue totaling $3.67 billion in 2016. Specialty diagnostics made $3.34 billion last year.

Thermo Fisher Scientific is big and has a wide reach, but does buying the stock make sense? Wall Street analysts think the company can grow its earnings by 10.5% on average annually over the next five years. That growth rate makes Thermo Fisher a reasonable pick for long-term investors, especially considering that the stock trades for only 15 times forward earnings. 

Better buy

If you only looked at valuation, Thermo Fisher Scientific is the better buy. Illumina's stock commands a premium price. Also, Thermo Fisher pays out a small dividend with a current yield of 0.40%, which gives it another advantage.

However, I'll go with my instinct and give the nod to Illumina. I like the prospects for the new NovaSeq system. My hunch is that it could be more successful over the next few years than analysts are predicting right now.

My selection of Illumina also stems from what we can't see just yet. If any company can break new ground in genomic sequencing, Illumina can. And I think it will.