Intuit (NASDAQ: INTU) The stock climbed 16% in October, according to data from S&P Global Market Intelligence.
The stock reversed the declines that followed its announced acquisition of Mailchimp in September. Investors were elated when Intuit unveiled its new mobile banking software, Money by Quickbooks, on October 19. Intuit will play an even bigger role in small business operations, with marketing and payment forwarding functions in addition to the accounting and invoicing functions that made it famous.
Intuit is one of the most established fintech stocks, led by products under the Quickbooks, TurboTax, Mint, and Credit Karma brands. It offers a range of valuable financial services to consumers and small businesses. It’s an envious position to occupy, and it creates a major economic divide – an advantage that only widens with the deployment of new business units.
Intuit is also showing impressive growth. The company forecasts revenue growth of 15% over the next 12 months, which roughly matches the growth rate over the past several years. Investors should be excited about Intuit’s new opportunities going forward. Users should be able to generate invoices and then request, receive and send payment transfers on a single platform. It’s really handy for business owners. Almost 30 million small businesses use QuickBooks, which could translate into serious revenue gains in the future.
Investors should be optimistic about Intuit. It has a stable business with major competitive advantages, and it is likely to grow another 15% this year. The recently announced measures are expected to extend this growth and competitive advantage in the years to come. All of this is proof of a well-run business with solid fundamentals.
Investors should expect to pay a premium to buy stocks with these strong characteristics, and Intuit is absolutely no exception. The stock’s forward P / E ratio is close to 55, which is high even when accounting for growth. Its PEG ratio is above 3. Intuit’s high price-to-sales ratio of 17.5 indicates that this is not temporarily low income either. Years of strong fundamental performance are already assumed in the stock price.
Intuit is suitable for long-term growth investors, but its aggressive valuation has distorted the risk-reward balance over the medium term.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.