Here's My Top Stock to Buy in December

As the end of 2017 nears, many people are probably beginning to think of taxes. And a significant portion of these people are likely planning to file their taxes online with Intuit's (INTU -1.45%) TurboTax. Further, some of these filers -- particularly any small businesses, self-employed freelancers, or independent contractors -- may have been interacting with one of Intuit's products all year long in preparation for tax season: QuickBooks.

Intuit's prevalence during tax season highlights TurboTax and QuickBooks Online's domination of their respective markets. For over 30 years, TurboTax has been ranked the best-selling tax software for Americans, and QuickBooks online has exploded to 2.55 million subscribers -- up 56% in the last 12 months alone. 

Image source: Getty Images.

Intuit's leadership position combined with two important catalysts -- a rapid transition to the cloud and an aggressive global expansion -- shows why it is a stock worth betting on for the long haul, and why it's my top stock to buy in December.

The raw numbers

Data source: Reuters. Table by author.

Intuit has seen strong growth over the past 12 months, with revenue and earnings per share climbing 11% and 22% year over year, respectively. This has been driven by surging growth in QuickBooks online subscribers and continued solid performance in TurboTax. Earnings growth has benefited from improved operating leverage and share repurchases.

But what's most notable about Intuit's recent performance is its accelerating growth. In Intuit's first quarter of fiscal 2018, year-over-year revenue growth accelerated to 14% -- up from 12% in Q4. Further, Intuit expects second-quarter revenue to increase 14% to 16% year over year. Revenue in its second quarter for fiscal 2017 increased just 10% year over year.

Two key catalysts

There are two powerful drivers behind Intuit's recent growth -- and both should persist over the long haul: increased adoption of cloud products and global expansion.

As businesses and consumers increasingly embrace cloud and software-as-a-service (SaaS) solutions, Intuit's online products are becoming more compelling. The impact of this trend on Intuit's business is particularly evident in the company's acceleration of overall revenue from its online ecosystem of solutions for small business and self-employed customers. Online ecosystem revenue in Intuit's first quarter was up 35% year over year -- an acceleration from 30% growth in fiscal 2017. 

Just as important as Intuit's fast-growing online customer base to the company's growth potential is its global expansion.

To see how big Intuit's international opportunity is, consider the growth in Intuit's QuickBooks Online subscribers outside the U.S. In Intuit's first quarter of fiscal 2018, these subscribers increased 70% year over year. In addition, Intuit's international QuickBooks Online subscribers now represent a meaningful 22% of total QuickBooks Online subscribers.

Intuit believes its focus on expanding to customers outside of its core markets increases its total addressable market from 300 million customers to 800 million customers, or from an $80 billion market to a $145 billion market. 

Investment thesis

There are risks, of course. The biggest risk is Intuit's valuation. At 40 times earnings per share, investors are pricing in strong double-digit earnings-per-share growth and sustained market leadership. If competition intensifies, or if Intuit's global expansion runs into unexpected headwinds, Intuit's growth may not meet investor expectations.

Fortunately, however, investors who buy Intuit stock aren't just getting a fast-growing company, they're buying a well-established industry leader with a long track record of success. Indeed, Intuit is one of the rare growth stocks that also pays a nice dividend (one that's growing by double-digits), highlighting its financial strength.

With its well-known financial products, a strong balance sheet, and a large customer base as a foundation, Intuit looks well-positioned to continue capitalizing on its significant growth opportunities. Even after the stock's 37% run-up so far in 2017, I think Intuit is a buy for investors willing to hold for the long haul.