2 Reasons to Like INTU and 1 to Stay Skeptical

Intuit’s 28.8% return over the past six months has outpaced the S&P 500 by 23%, and its stock price has climbed to $781.60 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy INTU? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Does INTU Stock Spark Debate?

Created in 1983 when founder Scott Cook watched his wife struggle to reconcile the family's checkbook, Intuit provides tax and accounting software for small and medium-sized businesses.

Two Things to Like:

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 $7.69 billion in Q1, and over the last four quarters, its year-on-year growth averaged 15.8%. 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. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Intuit is extremely efficient at acquiring new customers, and its CAC payback period checked in at 12.3 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation due to its scale. These dynamics give Intuit more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Intuit grew its sales at a 12.2% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Intuit.

Final Judgment

Intuit’s positive characteristics outweigh the negatives, and with its shares outperforming the market lately, the stock trades at 10.7× forward price-to-sales (or $781.60 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More Than Intuit

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