Roper Technologies, Inc.

ROP Details

Roper Technologies, Inc. (NYSE: ROP) is a diversified technology company focused on the designing and development of license and software-as-a-service (SaaS) software and engineered products and solutions, targeting a wide variety of niche end markets in the US, Canada, Europe, and Asia. The company’s operating segments include 1) Application Software, 2) Network Software & Systems, 3) Measurement & Analytical Solutions, and 4) Process Technologies. In September 2020, ROP completed the acquisition of Vertafore, Inc., which provides SaaS solutions for the property and casualty insurance industry, for a total consideration of ~USD 5.40 billion.

Robust Q1FY21 Results: The company reported a slight 13.17% increase in net revenues to USD 1.53 billion in Q1FY21 (ending March 31, 2021) compared to USD 1.35 billion in Q1FY20. Revenue from the Application Software segment amounted to USD 576.6 million, increasing 42.34% from USD 405.1 million reported in Q1FY20. The company’s net income for Q1FY21 was USD 400.5 million, representing a 20.27% growth YoY. Free cash flow during the quarter was USD 543 million vs USD 353 million in Q1FY20. ROP also reduced its total debt by USD 492.6 million to USD 9.07 billion as of March 31, 2021.

Key Risks: The company depends heavily on information technology networks for transmitting, processing, and securely storing electronic information, and communicating with its clients and suppliers. Hence, a shutdown of even one of its facilities due to any reason could delay its deliveries and in turn significantly impact its results of operations. In addition, various cyber threats such as computer viruses, cyber-attacks, etc. could lead to data corruption or leaking of sensitive information, which may negatively affect ROP’s brand name and business position. Moreover, due to concerns relating to data protection, privacy, and data security, the technology industry is subject to various regulations imposed by the regulatory authorities in the US and worldwide. The operational and monetary impact of these regulations may hurt the company's financials.

Outlook: For FY21, ROP expects adjusted diluted EPS to be in the range of USD 14.75 to USD 15.00 for FY21 and USD 3.61 to USD 3.65 for Q2FY21. These estimates exclude the impact of any unannounced future acquisitions or divestitures.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ROP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ROP increased by 13.80% in the past 3 months, and is currently leaning towards the higher end of the 52-week range of USD 362.90 to USD 483.50. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 65.94. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 404.20. Considering the significant uptick in the stock price, we believe that sound business fundamentals and a positive outlook are sufficiently accounted for at the current price. Hence, we recommend an “Expensive” rating on ROP at the current price of USD 475.91, down 1.23% as of July 08, 2021, at 2:27 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.