The parent company of TurboTax, QuickBoots and Mint, Intuit Inc. (INTU) has gained 17.7% over the past three months. The stock closed yesterday’s trading session at $415.81. It is currently trading just 1.9% below its 52-week high of $423.74, which it hit on February 16, 2021.
The company’s impressive performance over the past few months has been largely driven by its acquisition of Credit Karma and an increased demand for the digitization of financial management services, such as accounting and tax preparation.
We think INTU should continue to thrive this year and beyond based on its increasing focus on being an artificial intelligence (AI)-driven expert platform.
Here is why I think INTU still has plenty of upside:
Acquisition of Credit Karma
The company’s acquisition of Credit Karma in December 2020 was one of the biggest fintech deals of 2020. The combined company is expected to create a new consumer finance platform that will make it simple for consumers to make better decisions with their money and take greater control of their financial lives. On February 11, Credit Karma integrated its checking account tool with INTU’s TurboTax in their first joint project.
INTU’s gross profit margin of 83.1% is much higher than the industry average 47.9%. The company also has impressive ROE and ROA of 44.3% and 18.7%, respectively. In addition, the company’s leverage free cash flow margin of 27.5% compares favorably with the industry average 11.8%.
Impressive Historical Growth
INTU’s revenue increased at a CAGR of 13.9% over the past three years. INTU’s EBITDA and EPS also increased at CAGRs of 15.6% and 24.7%, respectively, over the same period.
Impressive Analyst Estimates
Analysts expect the company’s revenue to increase 43.7% for the quarter ending April 30, 2021, 16.2% in fiscal 2021 and 15.5% in fiscal 2022. Its EPS is expected to grow 42.5% for the quarter ending April 2021, 16.3% in fiscal 2022 and at a rate of 14% per annum over the next five years.
POWR Ratings Show Promise
INTU has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. In sync with the company’s high profitability, INTU has a Quality grade of A.
INTU has a Momentum grade of B. This is justified given the stock’s 37.1% returns over the past six months and 13.8% gains over the past month.
The stock has a B grade for Sentiment also, consistent with the favorable analyst estimates.
We have also given INTU grades for Growth, Value and Stability. Get all INTU’s ratings here.
Of 48 stocks in the B-rated Consumer Financial Services industry, INTU is ranked #5.
There are 10 other top-rated stocks in the same industry, Click here to access them.
Based on its high profitability and continued product and service innovation with the help of AI, I think INTU still has plenty of upside.
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INTU shares were trading at $413.88 per share on Thursday afternoon, down $1.93 (-0.46%). Year-to-date, INTU has gained 9.13%, versus a 4.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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