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Here's Why Roper (ROP) Deserves a Place in Your Portfolio
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Roper Technologies (ROP - Free Report) is thriving on the back of strong customer demand and a robust pipeline of orders. Strong cash flow generation capacity supports its shareholder-friendly activities.
Let’s delve deeper to unearth the factors that make this Zacks Rank #2 (Buy) company a good investment option.
Business Strength: Roper’s Application Software segment, which accounts for about 50% of total revenues, is benefiting from strength across its Deltek, Vertafore, Aderant and CliniSys businesses. Strength across enterprise-class customers, government contracting and private sector solutions is aiding Deltek, while record bookings and the adoption of SaaS models are key catalysts to Aderant’s growth. Vertafore, which is already going strong, is likely to get a boost from the recent acquisition of MGA Systems. Owing to growth in recurring revenues, the company expects mid-single-digit organic growth for the segment in 2023.
The strong performance of freight-matching business is a key growth driver for the Network Software segment. Strength across the Foundry and iPipeline businesses is driving the unit’s growth. Strong bookings, retention and customer expansions are boosting the iPipeline business’ performance. ROP expects mid-single-digit organic growth for this segment in 2023.
Strong momentum across the Neptune business due to increased demand for residential and commercial ultrasonic static meters is a key catalyst to the growth of the Tech-enabled Products segment. Strength across Verathon and Northern Digital business also supports growth of the Tech-enabled Products unit. With rising manufacturing productivity at Neptune and an improvement in the medical product businesses, the company anticipates low double-digit organic growth for the segment in the remainder of 2023.
Bullish Guidance: With market conditions remaining strong, Roper’s bullish guidance for 2023 raises optimism in the stock. For 2023, the company expects total revenues to increase more than 12% year over year. Organic revenues are estimated to increase 6-7%. Adjusted earnings are predicted to be $16.10-$16.30 per share compared with $15.90-$16.20 expected earlier.
Expansion Initiatives: Roper has been 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. It is expected to contribute approximately $370 million to Roper’s revenues and $175 million to its EBITDA in 2023. In January 2023, ROP acquired American LegalNet, strengthening its Aderant business. Acquisitions boosted sales by 8% in the first quarter.
Shareholder-Friendly Activities: Roper’s commitment to reward its shareholders through dividends holds promise. In 2022, ROP paid dividends of $262.3 million, up 11% year over year. In the first quarter, the company paid dividends of $72.3 million, up 10.7% year over year. This can be linked to ROP’s strong cash flow generation capacity. In the first quarter, the company generated a free cash flow of $445 million, up 4% year over year. In November 2022, the company hiked its dividend by 10%.
Northward Estimate Revision: The Zacks Consensus Estimate for Roper’s 2023 earnings has been revised upward by 5 cents in the past 60 days.
Price Performance: Due to the abovementioned tailwinds, shares of ROP have outperformed its industry in a year, gaining 20% compared with the industry’s 11.2% increase.
Vertiv has an estimated earnings growth rate of 135.8% for the current year. The stock has surged more than 100% in a year.
Amdocs Limited (DOX - Free Report) currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 2.8%, on average.
Amdocs has an estimated earnings growth rate of 11.1% for the current year. The stock has rallied 17.1% in a year.
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Here's Why Roper (ROP) Deserves a Place in Your Portfolio
Roper Technologies (ROP - Free Report) is thriving on the back of strong customer demand and a robust pipeline of orders. Strong cash flow generation capacity supports its shareholder-friendly activities.
Let’s delve deeper to unearth the factors that make this Zacks Rank #2 (Buy) company a good investment option.
Business Strength: Roper’s Application Software segment, which accounts for about 50% of total revenues, is benefiting from strength across its Deltek, Vertafore, Aderant and CliniSys businesses. Strength across enterprise-class customers, government contracting and private sector solutions is aiding Deltek, while record bookings and the adoption of SaaS models are key catalysts to Aderant’s growth. Vertafore, which is already going strong, is likely to get a boost from the recent acquisition of MGA Systems. Owing to growth in recurring revenues, the company expects mid-single-digit organic growth for the segment in 2023.
The strong performance of freight-matching business is a key growth driver for the Network Software segment. Strength across the Foundry and iPipeline businesses is driving the unit’s growth. Strong bookings, retention and customer expansions are boosting the iPipeline business’ performance. ROP expects mid-single-digit organic growth for this segment in 2023.
Strong momentum across the Neptune business due to increased demand for residential and commercial ultrasonic static meters is a key catalyst to the growth of the Tech-enabled Products segment. Strength across Verathon and Northern Digital business also supports growth of the Tech-enabled Products unit. With rising manufacturing productivity at Neptune and an improvement in the medical product businesses, the company anticipates low double-digit organic growth for the segment in the remainder of 2023.
Bullish Guidance: With market conditions remaining strong, Roper’s bullish guidance for 2023 raises optimism in the stock. For 2023, the company expects total revenues to increase more than 12% year over year. Organic revenues are estimated to increase 6-7%. Adjusted earnings are predicted to be $16.10-$16.30 per share compared with $15.90-$16.20 expected earlier.
Expansion Initiatives: Roper has been 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. It is expected to contribute approximately $370 million to Roper’s revenues and $175 million to its EBITDA in 2023. In January 2023, ROP acquired American LegalNet, strengthening its Aderant business. Acquisitions boosted sales by 8% in the first quarter.
Shareholder-Friendly Activities: Roper’s commitment to reward its shareholders through dividends holds promise. In 2022, ROP paid dividends of $262.3 million, up 11% year over year. In the first quarter, the company paid dividends of $72.3 million, up 10.7% year over year. This can be linked to ROP’s strong cash flow generation capacity. In the first quarter, the company generated a free cash flow of $445 million, up 4% year over year. In November 2022, the company hiked its dividend by 10%.
Northward Estimate Revision: The Zacks Consensus Estimate for Roper’s 2023 earnings has been revised upward by 5 cents in the past 60 days.
Price Performance: Due to the abovementioned tailwinds, shares of ROP have outperformed its industry in a year, gaining 20% compared with the industry’s 11.2% increase.
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Other Stocks to Consider
Some other top-ranked stocks within the Computers - IT Services industry are as follows:
Vertiv Holdings Co. (VRT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 11%, on average. You can see the complete list of today's Zacks #1 Rank stocks here.
Vertiv has an estimated earnings growth rate of 135.8% for the current year. The stock has surged more than 100% in a year.
Amdocs Limited (DOX - Free Report) currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 2.8%, on average.
Amdocs has an estimated earnings growth rate of 11.1% for the current year. The stock has rallied 17.1% in a year.