Khanchit Khirisutchalual
Roper Technologies (New York Stock Exchange:ROP) on Wednesday was upgraded to Neutral from an Underweight investment rating by JPMorgan analysts. They said the industrial technology company is valued fairly based on revenue prospects and free cash flow. growth.
“The stock is trading around its average historical premium of 30% P/E and a clean FCF yield of 4%, which is seen as attractive compared to the software companies we cover that currently trade in the 3% range. % to 3.5%,” C. Stephen Tusa, an analyst at JPMorgan, in a March 22 report. “We think a cleaner portfolio and visible growth better support the premium here, especially if the earnings environment turns choppy for others.”
Roper (ROP) in recent years has embarked on a strategy to acquire specialty software businesses while selling off subsidiaries that make equipment. Acquisitions in recent years include Frontline Education, a maker of school administration software, and Vertafore, which makes software for the insurance industry.
JPMorgan raised its target price on Roper (ROP) to $420 per share from $385 per share, based on a multiple of 25 times estimated 2024 cash EPS.
“We agree that this is a stable, high-margin portfolio that can organically grow above GDP over time, but remain concerned that the algorithm for mid-teen FCF compounding is not as easy as it appears to be,” according to JPMorgan. “The stock has been downgraded to better reflect a more reasonable capitalization rate, in part due to high valuations in specific software verticals.”
