What a brutal six months it’s been for Intuit. The stock has dropped 32.5% and now trades at $436, rattling many shareholders. This might have investors contemplating their next move.
Following the pullback, is now an opportune time to buy INTU? Find out in our full research report, it’s free.
Why Does INTU Stock Spark Debate?
Originally named after its founding product "Intuitive for the first-time user," Intuit (NASDAQ: INTU) provides financial management software and services including TurboTax, QuickBooks, Credit Karma, and Mailchimp to help consumers and small businesses manage their finances.
Two Positive Attributes:
1. Billings Growth Boosts Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Intuit’s billings punched in at $4.75 billion in Q4, and over the last four quarters, its year-on-year growth averaged 17.6%. This performance was solid, indicating robust customer demand. The cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Operating Margin Reveals a Well-Run Organization
Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.
Intuit has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 27.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
One Reason to be Careful:
Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Intuit’s revenue to rise by 11%, a deceleration versus its 21.1% annualized growth for the past five years. This projection is underwhelming and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
Final Judgment
Intuit has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 5.7× forward price-to-sales (or $436 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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