Intuit Inc. in the market today
Intuit Inc.'s shares closed at a price of $66.51 per share, gaining 0.94% from its opening price of $65.89 per share. The company's stock is currently trading at 23.45x its current annual earnings, while at 16.6x its estimated project annual earnings (12 months), with a market capitalization of $18.80 billion. The company's stock price has grown by 12.08% over the past one year, and is currently trading near the year's highest share price of $67.99 per share. The company's valuation (Forward P/E) against competitor Paychex's (PAYX) valuation of 22.29x suggests that Intuit is undervalued, and that its share price could be expected to increase in the future, since investors are currently paying less for the earnings that the company is expected to deliver in the future. Additionally, a PEG ratio of 1.31 suggests that the company is a growing entity, and thus buying its stock would yield profits in the future.
Financials
Intuit's quarterly revenues have increased to $378 million in Q4 2013 from $308 million in the fourth quarter of FY2012, experiencing a growth of 22.7% year-over-year, whereas its annual revenues have grown by 9.5% from the previous year. Its quarterly EPS has declined to -0.06 (loss of 6c per share) in Q4 2103 from 0.02 (profit of 2c per share) in Q4 2012, however, its annual earnings per share have increased by 8.84% year-over-year, from 2.6 in FY2012 to 2.83 in FY2013. Intuit's earnings have grown by 8.33% year-over-year, however, the total growth in earnings over the past four years is almost 50%. Moreover, its revenues have grown by 22.5% over the past four years, thus showing that Intuit is a company that holds promise of growth in the future too. The company's revenue guidance for the first quarter of the fiscal year 2014 estimates its revenues growing by 6% to 8% year-over-year.
The financial services applications market
With the growth in the smartphone and tablet industry, software and solutions businesses contributing to the mobile application industry have gained significantly from the growing handheld market. While Intuit has created its name in the financial services and solutions sector, it has nonetheless attempted to gain from the growth of the handheld industry as well. Among the numerous software packages that the company has produced for financial management, Quickbooks has earned its reputation as being the Number One rated accounting software for small businesses.
Quickbooks has recently launched a newer version that will be available to new users in late October this year, while existing users will be able to update their existing version of the software in 2014. The software update is said to come with a number of improvements that will help users manage the needs of a small business even better. The newer and updated version of Quickbooks has a more user-friendly interface, in addition to being cloud-based, which makes it accessible through iOS and Android devices in addition to a personal computer, via an active internet connection. Also, Quickbooks' online version has been refurbished and improved to specially perform better through mobile devices. Quickbooks has expanded its availability to more than 100 countries and more than 10 languages, thereby widening its target market.
It is believed that with the launch of the new version of Quickbooks, Intuit's market penetration will increase, as the newer and better Quickbooks software is predicted to attract more customers to the already increasing customer base of Intuit. Not only has Quickbooks been an encouraging factor for the company, Intuits' TurboTax solutions is also expected to increase the company's existing customer base. TurboTax, like Quickbooks, also enables its users to access and use its software through not only a personal computer, but also a smartphone or a tablet. Revenues for Intuit are expected to increase with the launch of the Quickbooks update.
Intuit has also been working on making its software packages more flexible in order to enable them to work with third party applications or software in order to attract more customers through ease of use of its systems. In an attempt to include third party systems on Intuit's financial services platform, Intuit has integrated Square, the mobile payment provider, with its Quickbooks software.
Tapping into the consumer market through the introduction of simple end-user software and applications that can be installed on a personal computer, or even more conveniently, on a tablet or smartphone, has been a very smart move by Intuit. This could help Intuit build its customer base even further, while making its existing customers more loyal to its products, thus producing greater and more stable revenues.
The current developments and improvements made in the company's business model, as well as the company's readiness in terms of taking advantage of favorable market conditions could be regarded as strength for the company, and could enable it to greatly increase its customer base.
Competition by Paychex Inc., a leading provider of payroll solutions should however be taken seriously by the company. The company would need to be very responsive to the dynamic nature of the market in order to retain its image and customer base, since due to the abundance of software available to customers today, users easily shift from one software to another in search of quality, ease-of-use, and stability.
Bottom line
Considering Intuit's valuation, financials, and the current developments made by the company as well as the favorable conditions prevailing in the market, the company seems a good long term investment and the current cheap valuations make it a solid buy.
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