Roper Is a Leading Vertical Software Acquisition Machine

Roper operates as a compounder of free cash flow, utilizing excess cash generated by its underlying businesses to acquire additional companies, which in turn generate additional free cash flow. While this strategy has historically worked well for the company, Roper’s focus on acquiring premium businesses has resulted in increasingly higher acquisition multiples, which have weighed on returns. Although we view the improved quality of Roper’s portfolio positively, we think Roper will continue to pay higher multiples for its new platforms, which are likely to weigh on returns.