What happened
Intuit (INTU 0.09%) stock climbed 16% in October, according to data from S&P Global Market Intelligence.
The stock reversed declines that followed its announced acquisition of Mailchimp in September. Investors were pleased when Intuit unveiled its new mobile banking software, Money by Quickbooks, on Oct. 19. Intuit will play an even bigger role in small business operations, with marketing and payment transfer functions in addition to the bookkeeping and billing functions that made it famous.
INTU Total Return Level data by YCharts
So what
Intuit is one of the more established fintech stocks, led by products under the Quickbooks, TurboTax, Mint, and Credit Karma brands. It offers a range of valuable financial services to both consumers and small businesses. That's an envious position to occupy, and it creates a major economic moat -- an advantage that's only getting wider with the new business units being rolled out.
Intuit is delivering impressive growth, too. The company is forecasting 15% revenue growth over the next 12 months, which is about the rate that it's been growing over the past few years. Investors should be excited by Intuit's new opportunities moving forward. Users should be able to generate invoices, then request, receive, and send payment transfers all in one platform. That's really convenient for business owners. Nearly 30 million small businesses use QuickBooks, so that could translate to serious top-line gains in the future.
Image source: Getty Images.
Now what
Investors should be optimistic about Intuit. It has a stable business with major competitive advantages, and it's likely to expand another 15% this year. The recently announced moves should extend that growth and competitive advantage years into the future. All of that is evidence of a well-run company with strong fundamentals.
Investors should expect to pay a premium to buy any stock with those strong characteristics, and Intuit is absolutely no exception. The stock's forward P/E ratio is nearly 55, which is high, even accounting for growth. Its PEG ratio is above 3. Intuit's high price-to-sales of 17.5 indicates that it's not a matter of temporarily low earnings, either. Years of strong fundamental performance are already assumed in the stock's price.
Intuit is fine for long-term growth investors, but its aggressive valuation has skewed the risk-reward balance over the medium term.
