In my last article on Roper Technologies (ROP) I commented that Roper isn't really a company geared for early short-cycle recoveries, but that as the recovery matured sentiment would recover. And so it has been, with the shares outperforming the broader industrial space since that last article, rising about 15% against a flattish performance for the sector.
Valuation isn't any simpler now, though. Roper has been a free cash flow machine for two decades, generating close to 20% cash flow growth over the last 20 years and over 10% growth over the last decade, driving annualized returns of close to 20% a year over both of those periods.
If you believe that 10%-plus FCF growth can be sustained, the shares still offer a worthwhile return, and Roper should be seeing improving demand across a wide range of its businesses. That long-term growth is going to require ongoing M&A activity (a quality issue for some investors), though, and you have to go through some contortions to find the shares cheap on a multiple-based methodology today.
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