Intuit Inc (INTU, Financial) experienced a daily loss of -0.17%, with a 3-month gain of 20.77%. The company's Earnings Per Share (EPS) stands at 7.92. But is the stock modestly undervalued? This article aims to answer this question through a comprehensive valuation analysis. Read on to gain valuable insights into Intuit's financial performance and intrinsic value.
Company Overview
Intuit Inc (INTU, Financial) is a leading provider of small-business accounting software (QuickBooks), personal tax solutions (TurboTax), and professional tax offerings (Lacerte). Since its inception in the mid-1980s, Intuit has dominated the U.S. market share for small-business accounting and DIY tax-filing software. With a stock price of $500.01 and a GF Value of $601.39, Intuit appears to be modestly undervalued. This valuation sets the stage for a deeper exploration of the company's value, combining financial assessment with essential company details.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Intuit (INTU, Financial) appears to be modestly undervalued based on the GF Value calculation. With a market cap of $140 billion, the stock's current price of $500.01 per share suggests that it is modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are excellent indicators of a company's financial strength. Intuit's cash-to-debt ratio of 0.59 is lower than 74.16% of 2690 companies in the Software industry. However, with an overall financial strength score of 7 out of 10, Intuit's financial strength is fair.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is generally a safer investment than those with low profit margins. Intuit has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $14.10 billion and Earnings Per Share (EPS) of $7.92. Its operating margin is 21.67%, which ranks better than 90.19% of 2723 companies in the Software industry. Overall, Intuit's profitability is ranked 10 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. GuruFocus research has found that growth is closely correlated with the long-term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Intuit is 20.4%, which ranks better than 74.57% of 2391 companies in the Software industry. The 3-year average EBITDA growth rate is 13.9%, which ranks better than 57.73% of 1992 companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Intuit's ROIC was 9.41, while its WACC came in at 12.16.
Conclusion
In conclusion, the stock of Intuit (INTU, Financial) shows every sign of being modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 57.73% of 1992 companies in the Software industry. To learn more about Intuit stock, you can check out its 30-Year Financials here.
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