Intuit Inc. (INTU) Quarterly Valuation – April 2014

500px-Intuit_Logo.svgBenjamin 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.  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 specific look at how Intuit Inc. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Intuit Inc. (Intuit) is a provider of business and financial management solutions for small businesses, consumers, accounting professionals and financial institutions. The Company organizes its portfolio of businesses into four principal categories: Small Business Group, Tax, Financial Services and Other Businesses. Small Business Group include seven segments: financial management solutions, employee management solutions, payment solutions, consumer tax, accounting professionals, financial services and other businesses. Tax include two segment: Consumer Tax and Accounting Professionals. Financial Services: This segment consists of digital (online and mobile) banking solutions and Other Businesse segment includes its global businesses. In June 2013, Intuit Inc acquired Elastic Intelligence Inc. Effective August 8, 2013, Intuit Inc acquired GoodApril, a provider of online tax planning services. Effective October 24, 2013, Intuit Inc acquired Level Up Analytics Inc.

INTU Chart

INTU data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $77.19
MG Value $89.40
MG Opinion Fairly Valued
Value Based on 3% Growth $38.04
Value Based on 0% Growth $22.30
Market Implied Growth Rate 10.46%
Net Current Asset Value (NCAV) $0.20
PEmg 29.42
Current Ratio 1.42
PB Ratio 9.79

Balance Sheet – 1/31/2014

Current Assets $2,541,000,000
Current Liabilities $1,790,000,000
Total Debt $499,000,000
Total Assets $4,718,000,000
Intangible Assets $1,453,000,000
Total Liabilities $2,483,000,000
Outstanding Shares 283,510,000

Earnings Per Share

2014 (estimate) $3.05
2013 $2.72
2012 $2.52
2011 $2.00
2010 $1.66
2009 $1.35
2008 $1.33
2007 $1.25
2006 $1.05
2005 $1.00
2004 $0.79

Earnings Per Share – ModernGraham

2014 (estimate) $2.62
2013 $2.29
2012 $1.97
2011 $1.64
2010 $1.42
2009 $1.26

Dividend History

INTU Dividend Chart

INTU Dividend data by YCharts


Intuit Inc. is suitable for the Enterprising Investor but not the Defensive Investor.  The company’s current ratio is too low, the dividend record too short, and the PEmg and PB ratios too high for the Defensive Investor.  The Enterprising Investor’s only gripe with the company is the low current ratio, but the overall debt level remains acceptable.  As a result, the Enterprising Investor following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company through a comparison to ModernGraham’s valuation of Automatic Data Processing (ADP) and 5 Low PEmg Companies for the Enterprising Investor.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.42 in 2010 to an estimated $2.62 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 10.46% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls 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 Intuit Inc. (INTU)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Intuit Inc. (INTU) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.






Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.