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Roper Technologies Inc ROP

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Morningstar’s Analysis

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Roper Posts Solid Third-Quarter Print; We Raise Fair Value Estimate by $1 to $486

Joshua Aguilar Senior Analyst

Analyst Note

| Joshua Aguilar |

Wide-moat-rated Roper printed solid third-quarter results that marginally exceeded the adjusted earnings per share expectations we earmarked after the last earnings cycle (which included what are now discontinued operations). Despite the supply chain challenges plaguing the entire industrial sector, on a continuing operations basis, revenue totaled just over $1.46 billion during the quarter, good for a 22% year-on-year increase (or 12% on an organic basis). And while EBITDA margins compressed by 30 basis points, the sales increase allowed propelled adjusted diluted EPS (on an continuing basis) forward to $3.60, good for a 24% year-on-year increase. Nonetheless, aside from timing of cash flows, nothing materially alters our long-term view of the firm. We raise our fair value estimate by $1 to $486 due to time value of money. While we continue to like the company and its long-term prospects, the stock trades in line with our expectations of future free cash flows.

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Company Profile

Business Description

Roper is a diversified technology company that operates out of four segments: application software; network software and systems; measurement and analytical solutions; and process technologies. The firm’s culture emphasizes acquiring asset-light, cash-generative businesses. Roper then reinvests this excess cash in businesses that yield incrementally higher rates of return. While the firm’s businesses are managed in a decentralized manner, Roper does not passively manage its portfolio. Instead, Roper manages its businesses through the Socratic method and empowers decision-makers through group executive coaching. Roper has now rotated a clear majority of its business from legacy industrial products into technology software in mature, niche markets with large quantities of deferred revenue.

6901 Professional Parkway East, Suite 200
Sarasota, FL, 34240
T +1 941 556-2601
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 18,400