Thematic evaluation
Back to company overview

Intuit, Inc. (INTU)

October 16, 2024

Compared to: Salesforce, Inc. (CRM) | Atlassian Corp. (TEAM) | Technology Select Sector SPDR Fund (XLK)

Our reasoning

Intuit's current valuation appears fair, balancing its strong financial performance, market leadership, and growth prospects against potential risks and a premium valuation. While the company's superior profitability metrics and growth rates suggest potential undervaluation, this is offset by valuation multiples that are above historical averages, reflecting market expectations of continued strong performance.

Key takeaways
  • Intuit is a financially strong company with a diversified portfolio of products and services, strong profitability, and a history of returning value to shareholders.
  • The company is well-positioned for continued growth, driven by its investments in new products and services, expansion into new markets, and strategic acquisitions.
  • Intuit's focus on AI-powered solutions and "done-for-you" experiences is a key competitive advantage, and the company is leveraging its strong brand and customer base to expand into adjacent markets.
  • While Intuit faces several risks, including competition, technological change, and regulatory scrutiny, its strong financial position and commitment to innovation provide a solid foundation for long-term success.
  • Intuit's valuation is currently above its historical average, reflecting its strong financial performance and growth prospects. The company's price performance has been more volatile than its peers, but its long-term growth potential remains attractive.
Fairly valued
Ask a question about Intuit, Inc. (INTU)
Evaluation summary

  1. Company Overview:

    • Intuit is a leading provider of financial technology solutions for consumers and small businesses, with a diversified portfolio of products and services spanning tax preparation, accounting, payments, and marketing automation. The company's core business model revolves around providing software and online services that simplify financial management for individuals and businesses.
    • Intuit's primary revenue streams are derived from its Small Business and Self-Employed segment, which offers QuickBooks financial and business management services, and its Consumer segment, which includes TurboTax income tax preparation products. The company also generates revenue from its Credit Karma segment, which provides personal finance tools and recommendations, and its ProTax segment, which serves professional accountants.
    • Intuit's target market is primarily U.S. consumers and small businesses, with a growing international presence. The company's products and services cater to a wide range of customers, from individual taxpayers to large enterprises.
    • For comparative analysis, we are using the Technology Select Sector SPDR Fund (XLK) as a benchmark and Atlassian Corp. (TEAM) and Salesforce, Inc. (CRM) as industry peers.

  2. Financial Performance:

    • Intuit has demonstrated strong revenue growth in recent years, driven by its core business segments and strategic investments in new products and services. Revenue has consistently grown at a double-digit rate, exceeding the industry average.
    • The company's profitability is also strong, as evidenced by its high gross profit margin, operating margin, and net profit margin. Intuit's profitability metrics are significantly higher than the industry average, indicating efficient cost management and strong pricing power.
    • Intuit's return on assets (ROA), return on equity (ROE), and return on invested capital (ROIC) are all significantly higher than the industry average, reflecting its efficient use of assets and strong profitability.
    • Compared to its peers, Intuit has generally outperformed TEAM in terms of revenue growth and profitability, but it has underperformed CRM.

  3. Operational Efficiency:

    • Intuit's balance sheet reflects a strong financial position, with a high level of cash and short-term investments. The company's working capital management is efficient, with a healthy current ratio and quick ratio.
    • Intuit's cash flow generation is robust, with strong operating cash flow and free cash flow. The company's free cash flow margin has been declining in recent quarters, potentially due to increased investments in growth initiatives.
    • Intuit's asset quality is high, with a low level of goodwill and intangible assets relative to its total assets. The company's capital expenditure is moderate, and its depreciation trends are consistent with its asset base.
    • Intuit has a history of returning excess cash to shareholders through dividends and share repurchases. The company's dividend payout ratio is sustainable, and its share repurchase program is aligned with its long-term growth strategy.
    • Compared to its peers, Intuit has a lower debt-to-equity ratio and leverage ratio than TEAM and CRM, indicating a more conservative approach to leverage.

  4. Growth Opportunities:

    • Intuit has identified several growth opportunities, including expanding into new markets, developing new products and services, and acquiring strategic businesses. The company is focused on leveraging its existing strengths in tax preparation, accounting, and financial management to expand into adjacent markets.
    • Intuit has a history of successful acquisitions, and it continues to explore M&A opportunities that align with its strategic goals. The company's recent acquisition of Mailchimp is expected to accelerate its growth in the small business and marketing automation markets.
    • Intuit is investing heavily in research and development (R&D) to develop innovative products and services that leverage artificial intelligence (AI) and other emerging technologies. The company's R&D pipeline is robust, and it is focused on developing solutions that address the evolving needs of its customers.
    • Intuit is expanding its geographic footprint, particularly in international markets where it sees significant growth potential. The company's acquisition of Mailchimp has provided it with a strong platform for international expansion.
    • Intuit's current strategic focus areas include Intuit Assist (its GenAI-powered financial assistant), TurboTax Live and QuickBooks Live, money solutions, mid-market offerings, and international expansion with Mailchimp and QuickBooks. The company is focused on delivering "done-for-you" experiences, digitizing services, and embedding AI-powered human experts across its business offerings.

  5. Risks and Threats:

    • Intuit faces several risks, including intense competition, rapid technological change, regulatory scrutiny, and cybersecurity threats. The company operates in a highly competitive market, with both established players and emerging disruptors vying for market share.
    • Intuit's tax preparation business faces potential disruption from government-provided tax software, and the company is subject to increasing regulatory scrutiny around data privacy and security. Cybersecurity incidents and data breaches could harm Intuit's operations and reputation.
    • Intuit's recent restructuring efforts could impact profitability in the short term, and the company's ability to adapt to rapid technological changes in its industries, particularly the rise of AI and other emerging technologies, is crucial for its long-term success.

  6. Valuation Analysis:

    • Intuit's valuation is currently above its historical average, reflecting its strong financial performance and growth prospects. The company's price-to-earnings (P/E) ratio, enterprise value-to-EBITDA (EV/EBITDA) ratio, and other valuation metrics are in line with its peers.
    • Compared to its peers, Intuit's valuation is generally in line with TEAM and CRM, indicating that the market is pricing its growth prospects and financial performance similarly.
    • Potential catalysts for Intuit's valuation include continued strong revenue growth, expansion into new markets, and successful integration of acquisitions.

  7. Price Performance:

    • Intuit's stock price has generally outperformed the Technology Select Sector SPDR Fund (XLK) over the past three years, but it has underperformed CRM. Intuit's price performance has been more consistent than TEAM's, but it has been less consistent than CRM's.
    • Intuit's stock price has been more volatile than XLK and CRM, indicating a higher risk profile. The company's beta value is higher than XLK's, suggesting that it is more sensitive to market movements.

  8. Future Outlook:

    • Intuit's management has provided positive guidance for FY2025, with expectations for continued revenue growth and profitability expansion. The company's guidance is in line with analyst estimates, and the consensus view is that Intuit is well-positioned for continued growth.
    • Intuit's future outlook is positive, driven by its strong financial position, growth strategy, and commitment to innovation. The company is expected to continue to invest in new products and services, expand into new markets, and manage expenses effectively.

  9. Summary:

    • Intuit is a financially healthy company with strong profitability, liquidity, and solvency. The company's revenue growth is slowing, but remains positive, driven by investments in new products and services, as well as expansion into new markets.
    • Intuit's profitability is expected to remain strong, driven by its focus on expense management and investments in new products and services. The company's cash flow generation is strong, providing flexibility for debt repayment, dividend growth, and investments in growth opportunities.
    • Intuit faces several risks, including intense competition, rapid technological change, and regulatory scrutiny. However, the company has a strong track record of adapting to change and innovating.
    • Overall, Intuit is well-positioned for continued growth and success in the future. The company's strong financial position, growth strategy, and commitment to innovation provide a solid foundation for long-term value creation.
Peer fundamentals 
Fundamentals
Insights
  • Intuit is a financially healthy company with strong profitability, liquidity, and solvency.
  • The company's revenue growth is slowing, but remains positive, driven by investments in new products and services, as well as expansion into new markets.
  • The company's profitability is expected to remain strong, driven by its focus on expense management and investments in new products and services.
  • The company's cash flow generation is strong, providing flexibility for debt repayment, dividend growth, and investments in growth opportunities.
  • The company faces several risks, including intense competition, rapid technological change, and regulatory scrutiny.
  • Overall, Intuit is well-positioned for continued growth and success in the future.
Analysis

  • Revenue - Revenue growth has been slowing in recent quarters, but remains positive. This could be attributed to factors such as increased competition or a maturing market. - The company's revenue growth is significantly higher than the industry average, indicating strong market share and a successful growth strategy. - The company's revenue growth is expected to continue in the coming quarters, driven by investments in new products and services, as well as expansion into new markets.

    • Profitability

      • The company's profitability is strong, as evidenced by its high ROA, ROE, ROTC, and ROIC, all of which are significantly higher than the industry average.
      • The company's gross profit margin is also significantly higher than the industry average, indicating strong pricing power and efficient cost management.
      • The company's net profit margin has been decreasing in recent quarters, potentially due to increased competition or higher expenses.
      • The company's profitability is expected to remain strong, driven by its focus on expense management and investments in new products and services.

    • Liquidity

      • The company's liquidity position is strong, as evidenced by its high cash and short-term investments, as well as its increasing current assets.
      • The company's current ratio and quick ratio are slightly lower than the industry average, indicating a slightly lower level of short-term liquidity.
      • The company's liquidity position is expected to remain strong, driven by its strong cash flow generation and conservative approach to leverage.

    • Solvency

      • The company's solvency position is strong, as evidenced by its low debt-to-equity ratio and debt-to-EBITDA ratio, both of which are significantly lower than the industry average.
      • The company's decreasing long-term debt and increasing equity demonstrate a focus on financial stability and a conservative approach to leverage.
      • The company's solvency position is expected to remain strong, driven by its strong free cash flow generation and continued focus on debt reduction.

    • Operational Efficiency

      • The company's operational efficiency is high, as evidenced by its strong ROA, ROE, ROTC, and ROIC, all of which are significantly higher than the industry average.
      • The company's gross profit margin is also significantly higher than the industry average, indicating strong pricing power and efficient cost management.
      • The company's operational efficiency is expected to continue to improve, driven by its investments in technology and automation, as well as its focus on expense management.

    • Cash Flow Analysis

      • The company's cash flow generation is strong, as evidenced by its high operating cash flow and free cash flow.
      • The company's free cash flow margin has been declining, indicating a potential decrease in cash flow efficiency.
      • The company's cash flow generation is expected to remain strong, driven by its core business operations and acquisitions.

    • Risk Factors

      • The company faces intense competition, including from providers of free offerings, which could harm revenue and profitability.
      • The company must adapt to rapid technological changes in its industries, particularly the rise of AI and other emerging technologies.
      • The company's tax preparation business faces potential disruption from government-provided tax software.
      • The company is subject to increasing regulatory scrutiny around data privacy and security.
      • The company's recent restructuring efforts could impact profitability in the short term.

    • Future Outlook

      • The company's future outlook is positive, driven by its strong financial position, growth strategy, and commitment to innovation.
      • The company is expected to continue to invest in new products and services, expand into new markets, and manage expenses effectively.
      • The company's strong cash flow generation and conservative leverage provide financial flexibility for future investments and potential economic downturns.
Most recent earnings report
Financial statements 
All public filings
Comparative Analysis
Benchmarks (as of 2024-10-15)
Technology Select Sector SPDR Fund (XLK)
  • Performance Comparison:
    • INTU has consistently underperformed XLK over all listed periods, with the largest underperformance occurring in the 2-year and 3-year periods, where INTU underperformed XLK by 38.12% and 37.62%, respectively. This suggests that INTU has struggled to keep pace with the broader technology sector.
  • Risk and Return Analysis:
    • While INTU has underperformed XLK in terms of returns, it has also been significantly more volatile. This is evident in the annualized volatility figures, where INTU's volatility has consistently exceeded XLK's. The larger drawdowns experienced by INTU further highlight its higher risk profile.
  • Risk-Adjusted Performance:
    • XLK has consistently offered a better risk-adjusted return than INTU, as evidenced by its higher Sharpe ratios. This suggests that XLK has been more efficient in generating returns relative to its risk.
    • INTU's beta value, consistently above 1, indicates that it is more sensitive to market movements than XLK. This suggests that INTU's price is likely to fluctuate more than XLK's during periods of market volatility.
  • Overall Assessment:
    • INTU has underperformed XLK in terms of both absolute and risk-adjusted returns. Its higher volatility and larger drawdowns indicate a higher risk profile. While INTU's beta suggests a greater sensitivity to market movements, it has not consistently outperformed XLK during periods of market growth. Investors seeking exposure to the technology sector may find XLK to be a more attractive option due to its superior risk-adjusted performance and lower volatility.
Peers Price History(as of 2024-10-15)
Salesforce, Inc. (CRM)Atlassian Corp. (TEAM)
  • Performance Comparison: INTU has generally outperformed TEAM over the past three years, but it has underperformed CRM. INTU's performance has been more consistent than TEAM's, but it has been less consistent than CRM's.
  • Risk and Return Analysis: INTU has provided higher annualized returns than TEAM but lower returns than CRM. INTU has been less volatile than TEAM but more volatile than CRM. INTU's maximum drawdown has been lower than TEAM's but higher than CRM's, indicating that INTU has a lower risk profile than TEAM but a higher risk profile than CRM.
  • Risk-Adjusted Performance: INTU has generally had a better Sharpe Ratio than TEAM and CRM, indicating that it has offered a better risk-adjusted return. INTU's beta value has been lower than TEAM's but higher than CRM's, indicating that INTU is less sensitive to market movements than TEAM but more sensitive than CRM.
  • Overall Assessment: INTU has generally outperformed TEAM on a risk-adjusted basis, but it has underperformed CRM. INTU has a lower risk profile than TEAM but a higher risk profile than CRM. INTU's recent performance has been more stable than TEAM's but less stable than CRM's.
Peers Fundamentals(as of 2024-07-31)
Salesforce, Inc. (CRM)Atlassian Corp. (TEAM)
  1. Market Position and Size:
    • INTU is a large player in the "Technology Services" sector and "Packaged Software" industry, with a market cap larger than TEAM but smaller than CRM. This suggests that INTU is a larger company than TEAM but smaller than CRM.
  2. Profitability and Efficiency:
    • INTU exhibits strong profitability, with Gross Profit Margin, EBITDA Margin, and Net Profit Margin significantly higher than the industry average.
    • INTU demonstrates efficient returns generation, with Return on Average Assets, Return on Average Total Equity, Return on Average Total Capital, and Return On Average Invested Capital significantly higher than the industry average.
  3. Financial Health and Stability:
    • INTU maintains a strong liquidity position, with Current Ratio and Quick Ratio higher than its peers.
    • INTU has a relatively low level of debt compared to the industry average, but it is more leveraged than CRM.
  4. Valuation and Market Perception:
    • INTU is valued more highly relative to its sales and book value than its peers and the industry average.
    • The market has a positive perception of INTU's growth prospects and future profitability, as evidenced by its high valuation metrics.
  5. Cash Flow and Capital Management:
    • INTU's cash flow generation strength is relatively weak compared to CRM, but similar to TEAM, despite INTU's larger market cap.
    • INTU is investing less in capital expenditures than CRM, but more than TEAM, despite INTU's larger market cap.
  6. Growth and Future Prospect:
    • INTU's growth rates are generally lower than the peer group average, particularly in terms of sales, EBITDA, net income, and basic earnings per share.
    • INTU's long-term growth is generally lower than its peers, but it is growing faster in terms of its asset base and shareholder equity.
  7. Potential for Investment:
    • INTU is a large and profitable company with a strong track record of generating returns for its shareholders.
    • However, its lower growth rates and weaker cash flow generation compared to its peers may make it less attractive to investors seeking high growth and strong cash flow generation.
  8. Key Risks and Considerations:
    • INTU's lower growth rates compared to its peers may indicate challenges in maintaining its competitive position in a rapidly evolving industry.
    • INTU's weaker cash flow generation compared to CRM may suggest less efficient conversion of earnings into cash flow.
    • INTU's higher level of long-term debt compared to its peers may indicate a greater reliance on debt financing, which could increase financial risk.
  9. Overall Assessment:
    • INTU is a large and profitable company with a strong financial position. However, its growth rates are lower than its peers, and its cash flow generation is weaker than CRM's. Additionally, INTU has a higher level of long-term debt compared to its peers. These factors may make INTU less attractive to investors seeking high growth and strong cash flow generation.