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Here's Why You Should Give Roper (ROP) Stock a Shot Now

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Roper Technologies (ROP - Free Report) is benefiting from strength across all its segments. Successive acquisitions are driving the company’s top line. Strong cash flow generation capacity is supporting the company’s shareholder-friendly activities.

Let’s delve deeper to unearth the factors that might make investing in this Zacks Rank #2 (Buy) company a smart choice now.

Business Strength: Roper’s Application Software segment is benefiting from strength across its Deltek, Vertafore, Aderant, CliniSys and Data Innovations businesses. The segment’s growth is supported by strength in its recurring revenue stream, led by strong customer retention and continued migration to SaaS delivery models. The company expects organic growth of 6-8% for the segment in the fourth quarter of 2022. The Network Software segment is benefiting from strong performance of the U.S. and Canadian freight matching businesses. Strength across the Foundry business owing to solid innovation capability is driving the segment’s performance. Solid customer additions are aiding the iTradeNetwork business within the Network Software segment.

For the fourth quarter, the company expects organic growth of 8-10%. With record orders and backlog levels, Roper’s Neptune business is fueling growth of the Technology Enabled Products segment. Strong ordering activity in the medical product business, including Verathon and Northern Digital, is a key growth driver for the segment. For the fourth quarter, the company expects organic growth of 5-7% for the segment.

Inorganic Growth Initiatives: Roper is carrying out successive acquisitions to expand its operations. In October 2022, the company acquired Frontline Education for $3.7 billion. The acquisition builds on Roper’s Horizon software business (which it acquired in 2008), expanding its presence in the K-12 education market. The acquisition is expected to contribute approximately $370 million to Roper’s revenues and $175 million to its EBITDA in 2023. In January 2022, the company acquired American LegalNet, which strengthened its Aderant business to provide comprehensive software solutions to its customers in the legal industry.


Portfolio Restructuring: Roper has been divesting non-profitable/non-core assets or businesses to focus on its core areas of growth. In June 2022, the company entered into a deal with CD&R to sell its Process Technologies segment and industrial units of the Measurement & Analytical Solutions segment. The company expects after-tax proceeds from the transaction to enhance its capital-deployment ability by over 7 billion to acquire lucrative businesses. Subject to customary conditions, the transaction is expected to be completed by 2022-end. In March, the company sold its TransCore business. In fourth-quarter 2021, it completed the divestitures of Zetec and CIVCO Radiotherapy businesses.

Improved Outlook: Following a strong third-quarter performance and to include the effect of Frontline acquisition, Roper raised its full-year outlook. For 2022, the company expects adjusted earnings per share from continuing operations of $14.09-$14.13 (previous view: $13.46-$13.62). Organic growth from continuing operations is expected to be 9% in 2022. For the fourth quarter, the company anticipates earnings per share of $3.72-$3.76. The company’s focus on investing in long term, sustainable organic growth along with product innovations should drive its growth going forward.

Shareholder-Friendly Activities: Strong cash flow generation capacity supports Roper’s shareholder-friendly activities. In the third quarter, the company generated an adjusted free cash flow of $353 million, up 9.3% year over year. In the first nine months of 2022, ROP rewarded its shareholders with a dividend payment of $196.2 million, up 10.9% year over year. In November 2022, the company hiked its dividend by 10%.

Northbound Estimate Revision: The Zacks Consensus Estimate for Roper’s 2022 earnings estimate has been revised upward by 3.9% in the past 60 days. The same for 2023 earnings has been revised northward by 3.1%.

Other Stocks to Consider

Some other stocks worth considering within the broader Computer and Technology sector are as follows:

CoStar Group (CSGP - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter average surprise of 22.4%. You can see the complete list of today’s Zacks #1 Rank stocks.

CoStar Group has an estimated earnings growth rate of 12.7% and 7.6% for the current year and the next year, respectively. Shares of the company have increased 12.9% in the past three months.

Taboola.com Ltd. (TBLA - Free Report) currently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter average surprise of 189.5%.

Taboola.com has an estimated earnings growth rate of 230.8% and 5.9% for the current year and the next year, respectively. Shares of the company have gained 3.5% in the past three months.


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