How good are you at seeing the future? If your answer lies along the lines of "not so great," perhaps you need to take a page from Jedi Master Obi-Wan Kenobi's book and quit thinking so hard. Use the Force. Or in terms more apropos to our particular galaxy, trust your intuition. Look toward the company named for intuitive thinking -- tax-prep and small-business accounting software wizard Intuit
As fellow Fool Rick Munarriz related to us more than half a year ago, by October 2004 Intuit saw pretty clearly where it was headed in fiscal 2005. It predicted earning between $1.93 and $2.01 per share on approximately $2 billion in revenues. Well, three quarters into fiscal 2005, the company has already booked $1.78 billion in revenues, recorded $2.12 per share in profit, and seems on track to lose $0.09 to $0.12 in its fourth, final, and historically money-losing quarter.
This Motley Fool Inside Value pick will almost certainly hit its self-set mark for the year and perhaps even beat it -- thanks in no small part to turning in yet another outstanding quarter, as described in last week's earnings report. In fiscal Q3 2005, Intuit earned 14% greater profits than in the year-ago quarter. What's more, because of a continuing stock-buyback program, those profits didn't get divvied up as much this year as last. With diluted shares outstanding dropping 6% over the past year, Intuit transformed its 14% firmwide profit boost into a 21% increase in earnings per diluted share.
Believe it or not, this story gets better. Going back to firmwide results, and examining the company's year-to-date numbers for the past nine months, we see that Intuit has recorded $401.6 million in GAAP net profits so far this year -- a 12% improvement over the first three quarters of fiscal 2004. Decent but not spectacular results, right?
Ah, but the results actually were pretty spectacular, even if the company didn't point this out in its release. From a free cash flow (read "money in the bank") perspective, Intuit looks half again as profitable as it appears under GAAP -- generating $652.5 million over the past nine months. Compared with last year's results, Intuit was really 25% more profitable this year -- twice as much as the GAAP results would suggest.
Does that make Intuit a good investment? Trust your instincts, Luke. This one's a no-brainer.
Since its first recommendation in the Inside Value newsletter three months ago, Intuit has already risen 15% -- while the S&P 500 average has actually fallen. Click here for a 30-day free trial to see what else we recommend. Stay if you love it, leave if you don't. There's no obligation to buy, and you have our word on that.
Fool contributor Rich Smith does not own shares of Intuit.