There are few certainties in life beyond death and taxes, as the saying goes. The list is clearly a bit longer and technology is certainly making a winning case for inclusion given the proliferation of everything from smartphones to cloud-based software. Intuit INTU combines taxes and software and its stock has more than doubled the broader tech sector’s climb over the last five years.
Let’s explore Intuit with the firm heading into the release of its first quarter fiscal 2021 earnings results on Thursday, November 19 to see why it might be a worthy buy and hold candidate.
Straightforward Tech…
The market is full of Software-as-a-Service and cloud computing companies. And a countless number of these firms are growing and providing integral services for their clients. This is a good problem to have, but it also makes it increasingly difficult for investors to narrow down their list of software stocks if they are hoping to achieve a somewhat diversified portfolio.
Intuit operates a relatively straightforward business in a cloud and SaaS space that becomes more esoteric by the day. The company offers a variety of financial services and it’s arguably most famous for its online tax software, TurboTax.
INTU also sells software geared toward accounting, small business money management, and personal finance, which include QuickBooks, Mint, and more. These platforms aren’t likely to go out of style no matter what the world looks like in five years or five decades.
The Mountain View, California-based company boasts roughly 50 million customers globally and it has grown its annual revenue by between 11% and 16% for the last five years. This clearly isn’t the massive growth that the likes of Zoom Video ZM or even Salesforce (NYSE:CRM) CRM have posted. But sometimes slow and steady is what your tech portfolio needs.
The firm topped our Q4 FY20 estimates in late August, with it full-year fiscal 2020 revenue up 13%. "We had an outstanding tax season, growing the Do-It-Yourself (DIY) category overall as well as our share of total returns, while posting the strongest customer growth in four years,” CEO Sasan Goodarzi said in prepared remarks last quarter.
What Else…
INTU stock has climbed over 35% in 2020, against the tech sector’s 29% average. This outperformance looks even better if we stretch out the timeline over the last five years. The stock is up nearly 270% vs. the tech space’s 125% and Salesforce’s 230%.
The company also pays a dividend, unlike other big names in the SaaS space such as Adobe ADBE and CRM, with a yield that sits at 0.67% at the moment to match Apple AAPL. And Intuit’s valuation is hardly that stretched compared to where it has traded over the last year and it compares well in terms of forward earnings and sales against other similar names in tech.
Zacks estimates call for INTU’s adjusted first quarter earnings to slip roughly 7% from the year-ago period to $0.38 per share on 3.4% higher sales. Peeking further down the road, the firm’s FY21 revenue is projected to pop 7.4%, with FY22 set to come in 11.4% higher to reach $9.19 billion. Meanwhile, INTU’s adjusted earnings are projected to climb by 9% this year and 14% in FY22.
Bottom Line
Intuit has crushed our bottom-line estimates in three out of the past four periods, including a 50% beat last quarter. INTU stock popped over 2% during regular trading Friday and it rests not far off its November 9 records. In the end, Intuit’s offerings are unlikely to go out of style, and its ability to expand its portfolio of financial services should help it continue to grow in our digitalized world.
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