3 reasons why Intuit (NASDAQ: INTU) can continue to provide exceptional returns
This article first appeared on Simply Wall St New.
Investors often dream of multi-baggers, stocks that offer extraordinary returns over the years and seem to keep going up.
Intuit Inc.(NASDAQ: INTU) just closed at US $ 554.02, a new all-time high. The share is 400% higher than 5 years ago, with an exceptional run of 26% in the last 3 months.
This article will analyze these findings and explain why Intuit is one of the stocks to keep on the watchlist.
The company just crushed the latest earnings results.
Non-compliant BPA: US $ 1.97 (beaten by US $ 0.38)
EPS deviation: US $ 1.37 (beaten by US $ 0.54)
Returned: US $ 2.56 billion (vs. US $ 240 million)
Exercise orientation: US $ 11.05B – US $ 11.2B, vs. consensus US $ 10.29B
Performance over 5 years
Over the five years of stock price growth, Intuit has seen compound earnings per share (EPS) growth of 23% per year. This EPS growth is lower than the 38% average annual increase in the share price. So it’s fair to assume that the market has a better opinion of the company than it did five years ago. And that’s hardly shocking given the growth history. This optimism can be seen in its fairly high P / E ratio of 69.35.
The company’s earnings per share (over time) are shown in the image below (click to see exact numbers).
We know that Intuit has improved its results lately, but will it increase its revenue? You could check that out free report showing analysts’ revenue forecasts.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. Arguably, the TSR gives a more complete picture of the return generated by a stock. In the case of Intuit, it has a TSR of 421% for the past 5 years. This exceeds the return on its share price that we mentioned earlier. And there’s no price guessing that dividend payments are a big reason for the discrepancy!
How Intuit Delivers This Feedback
Over the past decades, the company has built a significant divide, capturing the majority of the market. Although estimates vary, in some markets, like Canada, it is up to 80%.
In addition, the company is under close scrutiny by the Federal Trade Commission (FTC) for problems. This is yet another sign of a strong market leader, as its borderline legal practices are attracting a lot of attention.
QuickBooks is a proven product, praised for its efficiency, stability, and user-friendly experience. Not surprisingly, it dominates the small and medium-sized business market, with a 80% market share.
Additionally, the company owns another popular product, TurboTax –responsible for 30%dreaded personal tax returns. Although not the cheapest solution, it has been praised for its ability to solve complex problems.
The company is constantly working on new solutions with the current goal of becoming an expert platform based on AI. This is planned by machine learning, knowledge engineering and natural language processing.
By using AI to do the “heavy lifting” for the customer, the company further widens its economic gap and reduces the risk of switching to a competing product.
As an old saying goes, only 2 things are sure – die and pay taxes. And it looks like Intuit has covered the tax side.
Shareholders received a total shareholder return of 67% over one year –including the dividend. This is better than the annualized return of 39% over half a decade, which implies that the company has been doing better recently. Since the stock price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity.
To really gain insight, we need to take other information into account as well. Concrete example: we have spotted 2 warning signs for Intuit you must be aware.
If you like to buy stocks alongside management, you might like this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no positions in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents.