Intuit Inc Valuation – March 2017 $INTU

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 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  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 Intuit Inc (INTU) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Intuit Inc. is a provider of business and financial management solutions for small businesses, consumers and accounting professionals. The Company operates through three segments: Small Business, Consumer Tax and ProConnect. The Small Business segment serves and advises small businesses and the accounting professionals, and includes QuickBooks financial and business management online services and desktop software, payroll solutions, and payment processing solutions. The Small Business segment also includes third-party applications that integrate with the Company’s offerings. The Consumer Tax segment targets consumers and includes TurboTax products and services, which enable individuals to prepare and file their own federal and state personal income tax returns. The ProConnect segment targets professional accountants in the United States and Canada. Its ProConnect professional tax offerings include Lacerte, ProSeries, ProFile and ProConnect Tax Online.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of INTU – March 2017

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 $30,659,225,727 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 94.92% Pass
6. Moderate PEmg Ratio PEmg < 20 38.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 39.65 Fail
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 0.60 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -0.41 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

EPSmg $3.13
MG Growth Estimate 4.88%
MG Value $57.18
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $45.40
MG Value based on 0% Growth $26.62
Market Implied Growth Rate 14.87%
Current Price $119.72
% of Intrinsic Value 209.38%

Intuit Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.36 in 2013 to an estimated $3.13 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Intuit Inc. revealed the company was trading above its Graham Number of $16.32. The company pays a dividend of $1.28 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 38.23, which was below the industry average of 38.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.34.

Intuit Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.34
Graham Number $16.32
PEmg 38.23
Current Ratio 0.60
PB Ratio 39.65
Current Dividend $1.28
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 3


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Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2017
Total Current Assets $1,679,000,000
Total Current Liabilities $2,803,000,000
Long-Term Debt $463,000,000
Total Assets $4,373,000,000
Intangible Assets $1,327,000,000
Total Liabilities $3,588,000,000
Shares Outstanding (Diluted Average) 260,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.86
Jul2016 $3.69
Jul2015 $1.28
Jul2014 $3.12
Jul2013 $2.83
Jul2012 $2.60
Jul2011 $2.00
Jul2010 $1.77
Jul2009 $1.35
Jul2008 $1.41
Jul2007 $1.24
Jul2006 $1.16
Jul2005 $1.01
Jul2004 $0.79
Jul2003 $0.81
Jul2002 $0.32
Jul2001 -$0.20
Jul2000 $0.73
Jul1999 $0.97
Jul1998 $0.02
Jul1997 $0.25

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.13
Jul2016 $2.75
Jul2015 $2.30
Jul2014 $2.70
Jul2013 $2.36
Jul2012 $2.03
Jul2011 $1.68
Jul2010 $1.47
Jul2009 $1.30
Jul2008 $1.22
Jul2007 $1.08
Jul2006 $0.94
Jul2005 $0.74
Jul2004 $0.57
Jul2003 $0.48
Jul2002 $0.33
Jul2001 $0.34

Recommended Reading:

Other ModernGraham posts about the company

Intuit Inc Valuation – January 2016 Update $INTU
Intuit Inc. Analysis – October 2015 Update $INTU
Intuit Inc. Analysis – July 2015 Update $INTU
Intuit Inc. Quarterly Valuation – April 2015 $INTU
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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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