Corporation Overview
Roper Technologies Inc. is a diversified technology company. The Issuer works with companies that design and develop software. The corporation was incorporated on December 17, 1981 under the laws of the State of Delaware. The company operates in four segments:
- Application software (29.6% of total net income) – Aderant, CBORD, CliniSys, Data Innovations, Deltek, Horizon, IntelliTrans, PowerPlan, Strata, Sunquest.
- Network software and systems (28.5%) – ConstructConnect, DAT, Foundry, Inovonics, iPipeline, iTradeNetwork, Link Logistics, MHA, RF IDeas, SHP, SoftWriters, TransCore (Roper Technologies, 2022).
- Measurement and analytical solutions (29.7%) – Alpha, CIVCO Medical Solutions, CIVCO Radiotherapy, Dynisco, FMI, Hansen, Hardy, IPA, Logitech, Neptune, Northern Digital, Struers, Technolog, Uson, Verathon.
- Technological processes (12.2%) – AMOT, CCC, Cornell, FTI, Metrix, PAC, Roper Pump, Viatran, Zetec.
Roper provides a wide range of products and services to customers in over 100 countries. The Issuer’s products face competition, usually from a small number of companies. Roper considers itself a leader in most markets because no company can compete with them in a significant number of product lines. The company believes that its position in the market is due to the high technical complexity of products and software, the application experience used to create advanced products and systems, as well as its ability to implement and serve customers (Roper Technologies, 2022). The company’s closest competitors are Regal Rexnord Corp, which outperforms Roper Technologies in many respects. In particular, the competitor outperforms on criteria such as overall price, analyst rating, and health rating.
Latest Financial Statements
Before analyzing the financial statements of the organization, it should be noted that the last document published in the public domain falls on the last quarter of 2021. Nevertheless, based on it, you can draw all the necessary conclusions about the general state of the corporation. So, it is worth noting that the total income of the company is unstable, but varies depending on the period under review. It is also impossible to assert stable growth, since the revenue for December is 1512.3, while in June of the same year it was 2802.7. (Yahoo Finance, 2022) The difference is significant, which may indicate a rapid drop in revenue, and hence the cost of income. However, it should be noted that June-July 2021 are peak data, while in other months the total income varies from 1528.6 to 1462.8, which allows us to assert the financial stability of the company as a whole (Yahoo Finance, 2022). In order to draw the most productive conclusions, it is necessary to consider the operating expenses of the corporation, in particular tax payments.
Based on the data provided in the quarterly report, the costs are also stable and vary in the same amounts. This means that the corporation has minimal risks of emergencies and unforeseen events. In general, the cost of spending varies from the smallest 1059.3 to the largest 1191.1. It should be emphasized that in June 2021, expenses were also significantly higher, however, on closer examination, this is due to increased tax payments. However, earnings per share in the company is ambiguous, which needs to be disclosed. On the one hand, there are periods when shareholders receive a large return, for example, in June and March 2021, where the figures are at 4.91 and 2.73, respectively. On the other hand, in other periods, earnings per share are significantly reduced, reaching 1.87. Thus, share earnings are unstable, which creates some risks for their holders. The main shareholders of Roper Technologies (institutional holders):
- 14.64% – Price (T.Rowe) Associates Inc.
- 8.33% – Vanguard Group, Inc.
- 6.71% – Blackrock Inc.
- 4.63% – Franklin Resources, Inc.
- 4.10% – State Street Corporation.
- 2.00% – Massachusetts Financial Services Co.
- 1.85% – FMR, LLC.
- 1.73% – Nuveen Asset Management.
- 1.59% – Geode Capital Management, LLC.
- 1.48% – Akre Capital Management, LLC (Yahoo Finance, 2022).
- 52.94% – Other.
Summary of Financial Statement
It is important to note that only the quarterly report of 2021 was considered before, however, for a more objective analysis, reports from 2018 to 2021 inclusive should be analyzed. So, it can be seen, that the company is growing steadily, increasing both the total income of the organization and the net profit from sales and activities. In 2018, the entire income is calculated at 5191.2, while in 2021 the income increased to 5777.8 (Investing.com, 2022). Such growth must be called positive, as well as fast, since the profit is almost 25% (Investing.com, 2022). Separately, it is worth mentioning that the revenue of 2020 is only 4854.2, which is a significant drawdown. However, this can be explained by the emergence of the COVID-19 pandemic, which has had a negative impact on the activities of many companies. In particular, when examining the reports of Regal Rexnord Corp, it is noticeable that such circumstances have affected the entire niche as a whole. Despite this, already at the beginning of 2021, the company managed to cope with the challenges and troubles, which is noticeable in the increase in sales and overall income. In addition, 2021 is the most successful year compared to all other periods.
Ratio Analysis
One of the most effective methods for studying the success and position of a company in a niche is the analysis of its coefficients. Thus, it is necessary to consider how successfully Roper Technologies is implementing its activities, based on a comparison of the obtained indicators with industry averages. First of all, the company’s price/earnings ratio is 50.9, while the industry average is 21 (Investing.com, 2022). This information allows us to state that pricing in the company is its most successful decision that generates income. However, in the following indicators, the company is not significantly behind the average, which does not allow us to consider it a leader in the niche (Investing.com, 2022). Thus, the price / cash flow ratio of Roper Technologies is 28.91, while the indicator is 39.32 on average (Investing.com, 2022). The situation is the same with the price/free cash flow ratio, where 28.91 versus 41.47 (Investing.com, 2022). Although the organization’s book value is 4.28, with an average of 3.91, Roper Technologies is significantly underperforming in cash handling (Investing.com, 2022). This suggests that they are either inefficiently distributed by shares and sectors of the company, or are in a freeze.
In addition to all of the above, it is worth evaluating the overall profitability of the organization. In terms of gross margin and operating margin, Roper Technologies is ahead of the industry. The firm’s performance is 67.8% and 25.62%, respectively, with average numbers of 35.96 and 12.2, respectively (Investing.com, 2022). Approximately pre-tax margins and profit margins are 22% and 17.01% respectively versus 12.42 and 9.58 in the market (Investing.com, 2022). Such data allow us to state that the company’s activity is very profitable, since the ratios significantly exceed the industry average (Investing.com, 2022). This speaks of the development and stability of income in the organization, and therefore of strong competitiveness.
Finally, it is necessary to characterize the performance of Roper Technologies, and also compare it with the average values in the industry. The asset turnover is significant, it is almost half way behind, namely 0.24 versus 0.53 (Investing.com, 2022). Income per employee is also below average, 299.37K vs. 337.34K, but net income per employee is almost double, namely 50.91K vs. 29.29K (Investing.com, 2022). This information clearly demonstrates that despite the lower turnover of assets compared to the industry, the performance of the organization positively stands out from the others. This means that Roper Technologies is operating at full capacity and using almost the maximum amount of resources.
Discussion of Key Statistics
It was noted above that, as a result of characterizing the coefficients of the corporation, it can be concluded that the organization is completely successful. However, this is not the case, as important statistics confirm. First of all, we are talking about the dividend payout ratio, which is 24.75%. For comparison, in a competitor corporation, this indicator reaches 46.85%, which creates preferences for investors and shareholders. The situation is aggravated by the dividend coefficient for shares, which is 0.53% (Yahoo Finance, 2022). At the same time, for most competitors, this value remains 2.77% and higher (Yahoo Finance, 2022). As a result of such a dividend policy, the overall situation worsens, the company loses 3.38% in value (Yahoo Finance, 2022). Looking at the chart on Yahoo Finance, you can see that the overall performance of Roper Technologies is declining within a single day. At the same time, with an analysis of 5 years, the graph is growing with slight declines, so it can be argued that the corporation is currently in an insignificant crisis state. Nevertheless, based on general statistics, it will quickly get out of it, according to forecasts, in 2, maximum 3 months.
Historical Share Price Chart
In addition to a general assessment of the effectiveness of the organization’s activities, it is worth analyzing the shareholder situation and how risky it is to be a shareholder of Roper Technologies. To do this, you need to draw a graph that shows the sequence of changes in the price of one share over the past five years. So, in April 2017, one ordinary share of the corporation was worth $349 (Yahoo Finance, 2022). Over the next two years, the price hovered between $331 and $367, rising intermittently. It’s important to note here that the overall stock price situation at Roper Technologies is a little risky, as periods of decline in price are on average longer than periods of growth (Yahoo Finance, 2022). However, in 2020, before the global pandemic, the stock rose to $389 a share, but dropped to $254 by mid-2020 (Yahoo Finance, 2022). It must be emphasized that the fall was short-lived, and gradually the price returned to its original positions, and by the beginning of 2021 the price was $444 per piece, which was a record figure for the period under review, that is, not counting the second half of the year (Yahoo Finance, 2022). By November 2021, the share price was $490 per share, which should be noted as an absolute record in the history of Roper Technologies (Yahoo Finance, 2022). At the moment, as noted above, the stock is losing value and has dropped to $461 (Yahoo Finance, 2022). Nevertheless, within two weeks, according to experts, the share will return to the value of $480, which is associated with the integration of new systems into the management of the corporation (Yahoo Finance, 2022). Thus, it is necessary to conclude that the company’s share price chart is stable, omitting the pandemic conditions, and therefore reliable. Accordingly, when buying shares, an individual does not lose a critical amount of income, but can acquire additional dividends.
Information That May Affect Its Future Performance and Share Price
It should be noted that the analyzed corporation does not occupy leadership positions in the niche. Thus, analysts note that the overall rating of Roper Technologies is based on the indicator of 65-66, while it is 88-96 for leaders and close competitors (GlobalData, 2022). This suggests that the company has significant shortcomings that do not allow it to compete for the leader position. In particular, weak positions are shown in financial health, due to the high percentage of indebtedness to stakeholders. At the same time, the company has low profitability, despite good margins. The fact is that return on assets and equity shows unreliable ratios, which leads to a lack of growth prospects. It is important to highlight that this does not mean the growth of prices or income, but the development of the enterprise itself (GlobalData, 2022). So, according to analysts, without a technological or operational change and improvement, the company may lose its competitiveness, and therefore benefit for third parties. Such consequences can be avoided in several ways, for example, by introducing new products or investing in technology. A separate aspect can be identified by the management of Roper Technologies’ analysis of competitors in order to identify the necessary innovations.
Recommendations
As recommendations, first of all, it is necessary to single out the purchase of Roper Technologies shares and the quality of such a purchase. It is impossible to make an unambiguous conclusion about the consequences of acquiring and holding shares, because despite the stability, the future of the company is not clear. On the one hand, the company is far from bankruptcy or collapse, on the other hand, there are more and more prerequisites for reducing the overall cost. This means that if you buy shares today, you can lose income in the next quarter. At the same time, the charts and coefficients of the company allow us to talk about stability, and therefore, the absence of serious risks. In the end, analysts predict a way out of a small crisis stagnation, which means an increase in the price of shares in the near future, which means a bargain today. Thus, the equity interaction with Roper Technologies today can be assessed as an average buy.
References
GlobalData. (2022). Roper Technologies Inc: Segment analysis. Web.
Investing.com. (2022). Roper Technologies (ROP). Web.
Roper Technologies, Inc. (2022). Dividends & splits. Web.
Yahoo Finance. (2022). Roper Technologies, Inc. (ROP). Web.