Intuit: High Growth, High P/E; Up 14% Since Q3 FY25 Results
Company Update (INTU US) (Buy): Investors who paid for “quality” have been rewarded with a 25.7% price gain in the past year.
Highlights
Intuit targeting & delivering double-digit revenue & earnings growth.
TurboTax, Credit Karma both accelerated growth in recent quarters.
Non-GAAP EPS growth is now expected to be 19% in FY25.
At $754.45, ~44x guided FY25 Non-GAAP EPS but ~100x FY24 FCF.
IRR likely ~7% short-term, but should trend towards mid-teens over time.
Introduction
We review our Buy rating on Intuit after the release of Q3 FY25 (February-April) results post-market last Thursday (May 22). Intuit shares have risen 14.3% since results and are up 25.7% in the past year:
Intuit Share Price (Last 1 Year)
Source: Google Finance (28-May-25).
Terry Smith’s Fundsmith, a “quality”-focused U.K. fund manager which manages £20bn+ of assets, disclosed they re-initiated a “currently small” holding in Intuit during April, having previously exited in December 2022.
We have maintained a Buy rating on Intuit since September 2019, and last published our research online in May 2024. Intuit shares have gained 187% since our initiation and 25.0% since our last article. However, since 2024 we have viewed Intuit as a Buy “only as a defensive stock for long-term investors” because of its high headline valuation multiples. We hold Intuit shares in real life, but largely because we have wanted to avoid realising large taxable gains.
Q3 FY25 results show that Intuit has continued its double-digit revenue and earnings growth, with momentum having accelerated in key businesses. Growth in higher-value new segments is more than offsetting commoditization at the low end. Valuation is the main risk, with a Free Cash Flow Yield (deducting Share-Based Compensation) of ~1%.
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