Roper Is Poised for Solid Organic Growth in 2024

Roper acquires software companies with large amounts of deferred revenue. Large quantities of deferred revenue exist because many software businesses receive cash in advance of when services are rendered. Roper uses this cash to invest in businesses at incrementally higher rates of return. Its targets have large bases of recurring revenue in oligopolistic, niche markets with small total addressable markets. That revenue base is protected by strong moats that frequently post gross retention rates greater than 95%. Roper’s businesses typically don’t own their own infrastructure, which further contributes to its asset-light business model. Over 20 years, Roper’s net working capital as a percentage of sales dropped from 18% to negative 17%.