Sunday, March 4, 2018

For Roper, More Of The Same Looks Like A Good Plan

What do you say about a company that has averaged a total annual return to shareholders of over 20% the last 15 years, has outgrown its multi-industrial peer group on organic revenue, and generates FCF margins in the 20%’s while shifting the model towards more recovering revenue? All I can really say about Roper Technologies (ROP) is that this is definitely a stock to keep in mind when the music stops and the market cools off.

I discussed the challenges of valuing a stock like Roper the last time I wrote about the company (in which time the stock has risen another 30%), and it’s no easier now. Including the company’s near-term M&A plans into the valuation would suggest a mid-to-high single-digit total annual return is still in play, and I would also note that Roper’s valuation relative to other multi-industrials like Danaher (DHR), Honeywell (HON), Illinois Tool Works (ITW), and 3M (MMM) hasn’t really changed all that much compared to a trailing multiyear average.

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For Roper, More Of The Same Looks Like A Good Plan

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