Machinery Stocks

Roper Technologies Inc Valuation – January 2016 Update $ROP

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Roper Technologies Inc (ROP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Roper Technologies, Inc. (Roper), formerly Roper Industries, Inc., is a diversified technology company. The Company operates in four segments, including Medical and Scientific Imaging segment, which offers products and software in medical applications and digital imaging products; RF Technology segment, which provides radio frequency identification (RFID) communication technology and software solutions; Industrial Technology segment, which produces fluid handling pumps, materials analysis equipment and consumables, leak testing equipment, flow measurement and metering equipment and water meter and automatic meter reading products and systems, and Energy Systems and Controls segment, which produces control systems, fluid properties testing equipment, industrial valves and controls, vibration sensors and controls, and non-destructive inspection and measurement products and solutions.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of ROP – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,758,570,236 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.51 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 135.55% Pass
6. Moderate PEmg Ratio PEmg < 20 28.52 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.35 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

ROP value Chart January 2016

EPSmg $5.93
MG Growth Estimate 10.93%
MG Value $180.15
Opinion Fairly Valued
MG Value based on 3% Growth $86.05
MG Value based on 0% Growth $50.44
Market Implied Growth Rate 10.01%
Current Price $169.28
% of Intrinsic Value 93.96%

Roper Technologies Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $3.43 in 2011 to an estimated $5.93 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 10.01% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Roper Technologies Inc (ROP)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

ROP Charts January 2016

Net Current Asset Value (NCAV) -$26.14
Graham Number $87.25
PEmg 28.52
Current Ratio 2.51
PB Ratio 3.35
Dividend Yield 0.71%
Number of Consecutive Years of Dividend Growth 2

 

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Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $1,647,879,000
Total Current Liabilities $657,032,000
Long-Term Debt $2,792,067,000
Total Assets $9,432,999,000
Intangible Assets $7,572,554,000
Total Liabilities $4,304,094,000
Shares Outstanding (Diluted Average) 101,607,000

Earnings Per Share History

Next Fiscal Year Estimate $6.65
Dec14 $6.40
Dec13 $5.37
Dec12 $4.86
Dec11 $4.34
Dec10 $3.34
Dec09 $2.58
Dec08 $3.01
Dec07 $2.68
Dec06 $2.13
Dec05 $1.74
Dec04 $1.24
Dec03 $0.71
Oct02 $0.63
Oct01 $0.89
Oct00 $0.79
Oct99 $0.77
Oct98 $0.62
Oct97 $0.58
Oct96 $0.47

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.93
Dec14 $5.34
Dec13 $4.57
Dec12 $3.99
Dec11 $3.43
Dec10 $2.90
Dec09 $2.60
Dec08 $2.46
Dec07 $2.02
Dec06 $1.56
Dec05 $1.20
Dec04 $0.90
Dec03 $0.74
Oct02 $0.75
Oct01 $0.78
Oct00 $0.70
Oct99 $0.60

Recommended Reading:

Other ModernGraham posts about the company

15 Best Stocks For Value Investors This Week – 9/4/15
Roper Technologies Inc. Analysis – September 2015 Update $ROP
The Best Companies of the Machinery Industry – August 2015
Roper Industries Analysis – June 2015 Quarterly Update $ROP
34 Companies in the Spotlight This Week – 2/7/15

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

 

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