Wednesday, August 29, 2018

An Unexpected Leadership Transition Likely Won't Faze Roper

It’s hard to find much to pick at with Roper (ROP). Sure, the ROIC/CROCI could be a little higher, but this tech and software-driven multi-industrial has “out-Danaher’ed” Danaher (DHR) over the past 15 years with a 20% annualized return driven by well above-average revenue growth, operating margins, FCF growth, and FCF margins. What’s more, the company’s transition toward niche-based, asset-light, SaaS-driven recurring revenue puts the company in a sweet spot with respect to many of its more cyclical peers.

Roper investors got a negative surprise on Friday, though, as the company announced that Neil Hunn would be assuming the CEO position effective on September 1, with Brian Jellison stepping down. While this transition is coming about three years sooner than expected, Hunn has been groomed for this position for some time. Rising valuations and ample capital left to deploy will test Hunn early in his tenure, but my basic viewpoint today is that Jellison established a model that can continue to generate strong results without him.

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An Unexpected Leadership Transition Likely Won't Faze Roper

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