Signage for financial software company Intuit at the company’s headquarters in the Silicon Valley town of Mountain View, California, August 24, 2016. (Photo by Smith Collection/Gado/Getty Images).
Getty Images
Intuit (INTU) stock could be a solid investment opportunity at this moment. Why? Because it offers high margins – indicative of pricing power and capacity for cash generation – at a discounted price. Such companies typically produce consistent, predictable profits and cash flows, which lowers risk and facilitates capital reinvestment. The market tends to reward this behavior.
What Is Happening With INTU
INTU stock is currently 25% cheaper based on its P/S (Price-to-Sales) ratio compared to a year ago.
Although the stock may not yet reflect it, here’s what’s going favorably for the company. Recent increases in QuickBooks Online pricing, along with a transition to higher-value products, highlight sustained pricing power. This, combined with new customer acquisitions in the Online Ecosystem and strong uptake of the Intuit Enterprise Suite for mid-market, boosts revenue. AI integration enhances customer success through savings and productivity improvements, which aids cash generation. Intuit anticipates ongoing double-digit revenue growth and increasing margins for fiscal 2026.
INTU Has Strong Fundamentals
- Recent Profitability: Nearly 33.4% operating cash flow margin and 26.7% operating margin LTM.
- Long-Term Profitability: Approximately 32.3% operating cash flow margin and 24.2% operating margin average over the last 3 years.
- Revenue Growth: Intuit experienced a 17.1% growth LTM and a 13.5% average over the last 3 years, though this isn’t just a growth narrative.
- Available At Discount: At a P/S multiple of 7.5, INTU stock comes with a 25% discount compared to a year ago.
Below is a brief comparison of INTU’s fundamentals against S&P medians.
metrics
Trefis
MORE FOR YOU
*LTM: Last Twelve Months
Don’t Expect A Slam Dunk, Though
While INTU stock can be a persuasive investment option, it’s always wise to consider a stock’s past drawdown history. INTU declined by 72% during the Dot-Com crash, 49% amid the inflation shock, and 38% during the Global Financial Crisis. Even during less severe pullbacks like those in 2018 and the Covid pandemic, losses approached about 20-36%. Strong fundamentals do not shield against sharp declines when market sentiment shifts. Such drawdowns illustrate the stock’s volatility during various market conditions. However, the risk is not confined to significant market crashes. Stocks can decline even during strong market periods – consider events such as earnings releases, business updates, and changes in outlook. Refer to INTU Dip Buyer Analyses to review how the stock has bounced back from substantial dips in the past.
For further details, refer to Buy or Sell INTU Stock.
How We Arrived At INTU Stock
INTU caught our attention due to the following criteria:
- Greater than $10 Bil in market cap
- High CFO (cash flow from operations) margins or operating margins
- Significantly decreased in valuation over the past year
If INTU doesn’t seem appealing enough to you, here are several other stocks that also meet these criteria:
Remarkably, a portfolio established starting on 12/31/2016 with stocks that meet the above criteria would have shown the following performance:
- An average of 12-month forward returns of nearly 19%
- A 12-month win rate (percentage of picks yielding positive returns) of approximately 72%
A Multi-Asset Portfolio Gives You Safer Smarter Growth
While stocks fluctuate, bonds, commodities, and other assets help smooth the ride. A multi-asset portfolio stabilizes returns and minimizes single market risk.
The asset allocation framework of Trefis’ Boston-based wealth management partner provided positive returns during the 2008-09 timeframe when the S&P dropped more than 40%. Our partner’s current strategy includes the Trefis High Quality Portfolio, which has a history of comfortably outperforming its benchmark that encompasses all three – S&P 500, S&P mid-cap, and Russell 2000 indices.