Could This Intuit-ive Stock Mint Solid Returns?

Intuit  (NASDAQ: INTU  ) dreams of becoming synonymous with all things personal finance. And with hugely popular (and helpful) products such as TurboTax, Mint, and Quicken, the company appears well on its way to doing so. Last quarter saw an 11% boost in Intuit's revenue, along with the completion of several acquisitions and a healthy share buyback. 

Despite those positive stats, on the day of Intuit's earnings call, the company's stock took a dip. It was practically infinitesimal -- only about 1.5% -- but odd nonetheless. When a company seems to be thriving, why would its stock drop on the news of surging revenue, as opposed to rising along with it? Let's take a look under the hood and find out.

Financials
Recently, Intuit has begun placing particular emphasis on its small-business solutions, and on the cloud, perhaps to combat lagging sales on its tax products this time of year. During its quarterly conference call, Intuit explained that two-thirds of its $622 million in quarterly revenue came from "higher value cloud and connect services," which garnered "predictable recurring revenue streams."

That revenue is impressive, but there are a couple of dubious statistics farther down the income statement: namely, the company's margins. Intuit's operating and net profit margins were negative this time last year, and not much has changed since. Operating losses widened from $73 million to $77 million, mainly because of a boost in selling and marketing expenses. Net losses, in the meantime, narrowed slightly from $19 million to $11 million, thanks to a boost in funds from discontinued operations. Without that, Intuit would have been $57 million in the red.

Detailing the divestiture
It turns out Intuit spent the quarter unloading quite of a few of its former resources. On July 1, the company let go of its Financial Services business -- which focused on providing banking software to financial institutions and markets -- for $1 billion. That segment brought in $326 million in revenue last year, and its divestiture caused Intuit to have to lower its original annual guidance, from between $702 million and $727 million to between $615 million and $625 million. Additionally, in August Intuit completed the sale of its Intuit Health business, which brought in around $16 million annually.

In selling these divisions, Intuit has proved that it is taking the process of reinventing itself seriously. According to its earnings release, the company wants to become the go-to operating system for small-business success, and "do the nation's taxes in U.S. and Canada." Anything standing in the way of those goals is considered dead weight, and Intuit isn't afraid to prune some branches when necessary.

Taxing times to come?
Intuit has certainly transformed its business model over the past quarter. While it may take a while for profits to catch up, it's worth noting that even after divesting two segments and lowering its projected guidance, Intuit still saw an 11% increase in overall Q3 revenue, which is certainly impressive. For investors leery of hopping on board a company right in the middle of reinventing its structure, wait a quarter or two to see how Intuit manages to shape up its operation and net incomes. If there's continued improvement, Intuit could become a stock to hold onto for the long run.

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