Why I'm Buying Intuit (INTU)

barbaradavisbeatae1994srk

5/23/2025

Transcript

00:00hello everyone welcome back to the channel this is Fairlight Finder and

00:03today we're taking a look at Intuit ticker INTU you might know them from

00:09TurboTax, Credit Karma, QuickBooks, MailChimp they have quite a few

00:14different platforms that they offer as a SaaS business almost conglomerate

00:21helping small businesses midsize businesses I had noticed on my list of

00:28ranges that they were at a value based on the last time we looked at them where

00:36it would be worth purchasing and it had been a little bit since we last took a

00:40look so I wanted to look things over again and see is it truly worth

00:44purchasing and has the fair value gone up and what some of the growth prospects

00:50are if the growth rate is gonna hold at the high level that it was at jumping

00:56right into this the values are all over the place with such insane growth so

01:01fair value is 534 almost 535 with a discounted cash flows of 422 but when we

01:10go look at some of the metrics they're growing so fast I mean back in 2021 the

01:16fair value was 251 dollars projections for next year if they come in on par with

01:22analyst expectations and the growth rates that we put into our thesis then 688 is

01:30the fair value for next year so that's getting dragged down by some historical

01:35values because it's making massive leaps and also the discounted cash flows so I

01:40do think that this is worth a premium especially with what we're coming up with

01:44for the growth rate so earnings yield looks super low 2.22 we'd want $30 and 28 is

01:50next year's expectation cash flows are decent 28.4 on average 30% dividend yields a

01:59little low but their power ratio isn't too high it's right at the cusp of what we

02:05like to see that 30 to 50 and they're growing it really quickly too so this could become a bit

02:11more of a dividend stock awarding shareholders in the future ROE looks

02:17good 16.09 that's equities not too bad 0.74 it is under one where we like to see

02:22it ROI 9.31 and ROA 9.22 so I like the returns I like the cash flows not crazy for

02:33the dividend but it's not really dividend stocks they've got so much growth and

02:37also their returns are so good that they don't need to be diverting cash to reward

02:43shareholders and give a dividend it's rewarding enough for them to grow the

02:47business as they are gross margins super strong on average 80% this last year

02:5378.5 net was up a little bit 18.16 on average 18.1 so PE seems a little high 30.77

03:02but when we take a look at the metrics it's lower than what we've seen

03:07historically from 2021 to 2025 it looks like they're hovering somewhere between

03:15a 40 and a 60 PE so 30 is actually pretty low for them and PEG of 2.16 so

03:26definitely overvalued on the earnings front traditionally we're looking for that

03:30to be around 15 it's way over that and the PEG we like to see it under one which

03:37means there's some really strong growth baked in even with it being a hundred

03:42dollars a share below its peak in the last year it was 715 it's currently 615

03:49and it's gone as low as 533 well at least this isn't too difficult here in fact 12

03:55might be a little low I don't know what it's going to be like after these two

03:57years but 12.7 12.5 analysts are consistent with that so we're gonna use

04:0312 for the revenue growth share account I'd like to see it flat in this last two

04:08years they bought back some shares three years ago they issued some though so

04:13hopefully they stopped the issuance and if they're buying back less shares lower

04:21share price then we might see something in the realm of a quarter of a percent

04:26again and we can update things to see how that affects the results cash flows I

04:32want them a little above revenues because they are below average on cash flows and

04:36it is something that's kind of dragging them down as crazy as it is to say but

04:40they just don't have massive growth in those cash flow assets last two years 5%

04:46we'll stick with that liabilities 6.6 for the last two years we'll go with 6 for

04:53the thesis dividend of course it's going to come down a bit higher dividend to

04:59start with I mean if they can get 8% that brings them to $5 in five years in

05:08dividends and then at that point you'd be getting a yield on cost buying today of

05:13point eight percent so again definitely not a massive dividend stock here and I

05:19had to update my formula here but this shows that you are expecting a market

05:26outperforming return in the next three years and in the next five years you're

05:30beating out the market by 1% in the next three and 9% in the next five as long as

05:37this holds true and that gain is based off today's share price I mean if you got

05:42in at the 532 you'd be looking really really good so I'll phone by 21% in the

05:49three year and by 44% in the five years so very very good returns for someone who

05:56bought down at the 530 level which is where the fair value is if they had run

06:02through the numbers set their target price at the fair value or maybe even a

06:06little bit lower I could have sold puts lower and made a bit off premiums but

06:11that is why we run the numbers and find what a reasonable price for our own

06:17portfolios is so everything is going to look right here I mean there is no

06:26complaints about really anything here balance sheet growth assets aren't tangible I

06:35mean they're almost to the point where they will be I wouldn't be surprised if

06:38they ended up with some tangible assets this year and that could get them going

06:43on a tangible book value as well cash flow strong definitely dip down in 2024

06:49like we saw was below average so I mean we'd like to see 2024 should then close to

06:55this 5000 line and 2025 should be a bit higher than that but we can give them a down

07:00year or two dividend looks amazing like I said they're going it's super fast and

07:06then the price balance sheet pretty flat down here but it's growing very slowly cap flows are the

07:15next to lowest value on average had a really good year in 2023 aside from that

07:21just kind of linear growth and then we have earnings I guess I mean earnings were

07:29right in line with fair value in 2024 and analyst projections are really really

07:35strong for this company so we will see how they perform with that usually it moves

07:41pretty well in line from 2022 to 2024 the fair value was very close to the

07:49earnings value and then dividend some great growth kind of leveling off but I did put in a bit of a

08:00lower percentage going forward and it was in 2024 and 2023 very valuable for their value and then

08:12finally we have the actual share price which doesn't seem to have too much correlation with anything

08:16I mean everything was kind of clustered and it was even higher back in 2021 it was very high in 2022

08:26and then dipped down while a lot of the metrics moved upwards so 2023 the market moved opposite of the

08:39fundamentals and then not much growth into 2024 at which point we saw even better growth in the

08:46fundamentals I mean there was a bit of a dip in the cash flows which brings us to 2025 where the share

08:56price currently sits right about at the fair value and we are seeing good growth in the cash flows in

09:03the fair value and the earnings and then just moderate linear growth through the dividend and the balance sheet

09:13so all in all I do like what I'm seeing with this thing no massive red flags uh the market definitely

09:20seems to like it and it has super strong fundamentals outperforming expectations market outperforming

09:27expectations uh all in all this is what we like to see and I do think that it's at a reasonable price

09:34right now to at least start building a position potentially consider one I mean you are outperforming

09:41the market a tad with what you're getting and and that's what a good time to start your dollar cost

09:47averaging is so I want to thank you guys for watching please like enjoy the video comment what other stocks

09:53we should take a look at and subscribe so you can stay up there with everything and I'll catch you next time

09:57see you next time

Category

Transcript

Recommended