Investors often daydream about multi-baggers, stocks that deliver extraordinary returns over the years and seem to be going only up.
Intuit Inc. ( NASDAQ: INTU ) just closed at US$554.02, a fresh all-time high. The stock is 400% higher than 5 years ago, with an outstanding 26% run in the last 3 months.
This article will analyze these results and elaborate on why Intuit is one of the stocks to keep on the watchlist.
The company just smashed the latest earnings results.
- Non-Gaap EPS: US$1.97 (beat by US$0.38)
- Gaap EPS: US$1.37 (beat by US$0.54)
- Revenue: US$2.56b (beat by US$240m)
- FY Guidance: US$11.05b – US$11.2b, vs consensus US$10.29b
During five years of share price growth, Intuit achieved 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 the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 69.35.
The company's earnings per share (over time) are depicted in the image below (click to see the exact numbers).
We know that Intuit has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts .
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Intuit, it has a TSR of 421% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
How Intuit Delivers These Returns
Over the last decades, the company built a significant moat, capturing the majority of the market. Although estimates vary, in some markets, like Canada, it is up to 80%.
However, the company is facing scrutiny from the Federal Trade Commission (FTC) for antitrust issues. While it is a strong market leader, it will need to keep its business practices that are under scrutiny in check.
QuickBooks is a proven product, praised for efficiency, stability, and user-friendly experience. It is not surprising that it dominates the market for small to mid-sized businesses, with a massive 80% market share .
Furthermore, the company owns another popular product, TurboTax – responsible for 30% of the dreaded personal tax reports. While not the cheapest solution, it has been praised for its ability to tackle complicated issues.
The company is continuously working on new solutions with a current goal to become an AI-driven expert platform. This is planned through machine learning, knowledge engineering, and natural language processing.
By using the AI to do the „heavy lifting“ for the customer, the company is further widening its economic moat and lowering the risk of switching to a competitor's product.
As an old proverb says, only 2 things are for sure - death and taxes. And it seems like Intuit has the tax side covered.
Shareholders have received a total shareholder return of 67% over one year -including the dividend. That's better than the annualized return of 39% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity.
To truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Intuit you should be aware of.
If you like to buy stocks alongside management, you might love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on US exchanges.
Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.