Is Intuit A Good Stock to Buy?

Intuit Inc. (NASDAQ:INTU), a $19 billion market cap software company, offers business and financial management products for a variety of functions. It is best known for QuickBooks and TurboTax, but other products cover personal finance, payroll software, and online marketing. Year to date Intuit’s stock price is up 18%, in line with the NASDAQ index.

The company released its 10-Q for the first quarter of its fiscal year (the quarter ended in October) last month. Net revenue for the quarter was up 13%, and net losses came in considerably lower than the same period a year ago. This isn’t incredibly relevant- this is typically a soft quarter for Intuit Inc., with the majority of its earnings coming in the fiscal quarter ending in April and most of the rest coming in the fiscal quarter ending in January. It’s possible that the relatively good quarter does signal better numbers over the next several months as well, but we wouldn’t depend on that.

Intuit Inc. trades at 23 times trailing earnings, a valuation at which we’d want to see good growth on the bottom line. Wall Street analysts do see better numbers ahead: consensus is for $2.82 in earnings per share for the crucial April quarter, which would be a 12% increase from what the company earned in the same quarter of the last fiscal year. The year as a whole is expected to result in $3.33 in EPS, implying a current-year P/E multiple of 19; the forward P/E, based on earnings for the fiscal year ending in July 2014, is 17. It’s possible that Intuit will get to these improvements in earnings per share in part through buybacks: repurchasing activity has been somewhat limited recently, but the company has reported that a large buyback program is authorized and it did report about $560 million in cash, cash equivalents, and investments on its balance sheet. However, current assets were only slightly higher than current liabilities. We’d also expect Intuit to be less active in using its cash until it has its actual results from its peak quarter.