5
Intuit Inc. (INTU)
- Equity
- US
- Technology
RISK
RETURN
Key risk factors
Low price volatility
Good trading liquidity
Resilient to price shocks
Key return factors
Strong margins and returns
Greatly overvalued vs peers
Good growth
Company profileIntuit Inc. provides financial management and compliance products and services for consumers, small businesses, self-employed, and accounting professionals in the United States, Canada, and internationally. The company operates in four segments: Small Business & Self-Employed, Consumer, Credit Karma, and ProConnect. The Small Business & Self-Employed segment provides QuickBooks online services and desktop software solutions comprising QuickBooks Online Advanced, a cloud-based solution; QuickBooks Enterprise, a hosted solution; QuickBooks Self-Employed solution; QuickBooks Commerce, a solution for product-based businesses; QuickBooks Online Accountant and QuickBooks Accountant Desktop Plus solutions; and payroll solutions, such as online payroll processing, direct deposit of employee paychecks, payroll reports, electronic payment of federal and state payroll taxes, and electronic filing of federal and state payroll tax forms. This segment also offers payment-processing solutions, including credit and debit cards, Apple Pay, and ACH payment services; QuickBooks Cash business bank account; and financial supplies and financing for small businesses. The Consumer segment provides TurboTax income tax preparation products and services; and personal finance. The Credit Karma segment offers consumers with a personal finance platform that provides personalized recommendations of home, auto, and personal loans, as well as credit cards and insurance products. The ProConnect segment provides Lacerte, ProSeries, and ProFile desktop tax-preparation software products; and ProConnect Tax Online tax products, electronic tax filing service, and bank products and related services. It sells products and services through various sales and distribution channels, including multi-channel shop-and-buy experiences, websites and call centers, mobile application stores, and retail and other channels. The company was founded in 1983 and is headquartered in Mountain View, California.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
55.30
60.70
PEG
2.60
-
P/B
9.10
7.90
P/S
10.70
10.60
P/FCF
33.60
29.60
EV/EBITDA
36.70
36.20
Based on key historical and expected multiples, the stock is greatly overvalued relative to its peers. Specifically, the stock is expensive' on P/E, overvalued on EV/EBITDA, and reasonably priced on P/FCF.
Performance: Mixed
The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 3ppts over past six months and grown 5ppts slower in the past month. At the same time, the stock's performance relative to its the peers from the same country and sector is different. It underperformed these peers by 2ppts over six months and grew 8ppts slower in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Somewhat favourable
The average target price is 741 and suggests 22% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 775.0. This translates into 28% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 556.0. This is equivalent to 8% downside potential in the worst case.
Profitability: Strong
RoE
Intuit Inc. reported a return on equity (RoE) of 18.2% in the last 12 months, up from 16.9% in FY23. The market consensus projects an RoE of 18.2% in FY24, however, this time below its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 10.3% in the last 12 months, an increase from 9.7% in FY23. The market analysts predict that RoA will be 10.3% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) grew to 13.1%, above the peers. The consensus estimate for FY24 for RoCE is 16.6%, however, this time below its peers.
Net margin
EBITDA margin
Historically, INTU has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 19.4%, a growth from 18.4% in FY23. The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 28.5% in the last 12 months, a decline from 29.1% in FY23.
RoIC / WACC = 1.4(average value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.4 in the past several years. This ratio implies a average shareholder value creation. Growth: Good
Revenue
EBITDA
EPS
Free cash flow
INTU reported revenue of USD 15 813mn in the last 12 months, up 5% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS grew 11% from FY23 to USD 10.97. Market expects EPS to reach USD 10.02637 in FY24.Revenue growth has been moderate in the past several years (positive-to-neutral), while EBITDA growth has been steady. This all contributed to continued EPS growth (positive-to-neutral). The FCF trend is in line with EBITDA.
Dividends: Decent
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been low and below its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.
Default risk: Limited
The risk of default is minimal. We note robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to excessive margin volatility, and poor working capital management.
Volatility: Low
In normal market circumstances, INTU is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the mild intraday volatility of the instrument.
Stress-test: Resilient
In highly turbulent market conditions, INTU is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low.
Selling difficulty: Low
INTU boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.