Intuit's Winning Streak Continues

Software maker Intuit (Nasdaq: INTU  ) recently reported second-quarter earnings of $0.77 per share, exceeding the average estimate by a penny. That shouldn't come as a surprise considering the company has a habit of beating the Street's expectations. Total sales increased 5% driven by strong gains from QuickBooks (a 10% sales gain) and consumer tax software (a 9% sales gain).

However, net profits for the period eased 1% from a year-ago level. Intuit's popular consumer software program Quicken -- which has seen increased competition from Microsoft's (Nasdaq: MSFT  ) Money -- slipped, but it accounts for only 11% of the total revenue pie. The largest slices are QuickBooks, TurboTax, and Intuit's new free online tax filing service, SnapTax.

Since the bulk of Intuit's sales are driven by the tax season, there's a definite seasonal effect here. Sales of the consumer tax prep software TurboTax really ramp up in the third quarter because U.S. taxpayers delay filing returns until closer to the April 15 deadline. (Makes sense to me.) The upcoming third quarter is Intuit's most profitable period of the year. Historically the first and fourth quarters end in red ink, which means Intuit bats .500, financially speaking. So Foolish investors might be asking, "Given Intuit's seasonality, what's the bigger picture here?"

Annual growth as a whole is the more important focal point. Let's take a look back at some trends to see whether we can predict the future. (I don't claim to be a fortune-teller, but I will pretend to be one for this exercise.)

First, revenues have grown at a double-digit rate five out of the last six quarters. Sounds good, right? Yes, it does, but -- and there is always a but -- what about the future trend? When you compare the year-over-year increases, the projections going forward fall a bit short. Total revenues climbed by 13% to $1.85 billion in 2004. The company has forecast ~9% growth in fiscal 2005, a 30% slowdown from the previous year. It's to be expected that a maturing company will see a slowdown in the rate of growth, and perhaps that is part of the reason for the lackluster performance in the stock price. Intuit is down about 10% over the last 12 months.

So is the stock a good value? Looking into my Foolish crystal ball -- silence, please -- earnings are expected to rise 18% for 2005. At $40 Intuit trades with a forward P/E of 18, so the stock seems attractive on a valuation basis. While there are concerns about competition with TurboTax from rivals such as H&R Block (NYSE: HRB  ) with its own software TaxCut, and slipping sales of Quicken, the core business remains strong and will likely continue to generate double-digit earnings growth in the years to come. The one missing ingredient is better sales during the off-season. Intuit needs to create a new product mix for the months after April 15. That way Foolish investors can enjoy the whole season, not just a couple of good ones.

For more Foolishness check out Quicken vs. Money.

Fool contributorKelvin Taylordoes use Quicken and TurboTaxbutdoes not own shares of any of the companies mentioned.

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