The next tax season is a long way off, and tax preparation specialist Intuit (NASDAQ:INTU) shouldn't have much to report tomorrow night when it releases its Q3 2006 earnings. However, report it will, and we're here to show you what to expect.

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts have an opinion on Intuit. Six say to buy it; another six to hold; and the last two want us to sell.
  • Revenues. Analysts expect, on average, to see tomorrow's sales number come in 24% higher than last year, at $322 million.
  • Earnings. Profits are another matter entirely. They're predicting a net loss of $0.04 per share, same as last year.

What management says:
Right now, Intuit management is hammering home the fact that an internal investigation into stock-options granting practices stretching back as far as 1997 has found no evidence of wrongdoing. That means that stated financial information can be relied upon because the company won't need any restatement adjustments.

Now, the company is still under informal investigation by the SEC over the matter, and there's an official investigation by the U.S. Attorney General's office. The book is hardly closed yet, but the internal findings are indeed comforting. Intuit would only get itself into hotter water by fumbling this inquiry, so there's every incentive to ensure that the review was detailed and accurate.

What management does:
Margins were already stellar before the latest report, but still managed to improve -- except on the bottom line. The somewhat ironic reason for the net margin drop was higher taxes, but even then the bottom-line metric was higher than it was 18 months earlier.

Margins %

1/05

4/05

7/05

10/05

1/06

4/06

Gross

80.5

81.4

81.7

81.4

81.3

82.1

Op.

23.2

25.5

25.7

24.1

24.0

27.5

Net

17.6

18.4

18.7

18.3

19.1

18.1
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Intuit runs a very, very seasonal business with two great quarters leading up to the tax filing deadline every year, followed by two miserable quarters when few people care about taxes and the Quicken accounting package is left to carry the load virtually on its own. Tomorrow's report concerns one of those slow periods. Operating expenses are fairly constant even when revenues are low, so expect a tidy loss this time. It's nothing to get upset about.

The company is running a tight ship, as evidenced by the margin history above. It's far and away more efficient than main competitor H&R Block (NYSE:HRB) on all three levels, and is also growing revenues and net income much faster than its rival. The market seems to have caught on, though: Intuit trades at a significant premium to H&R Block. Just pick a metric: Intuit sports a trailing P/E ratio of 30.5 and an enterprise value-to- revenues ratio of 4.1; those numbers for H&R Block are only 15.4 and 1.6, respectively.

Philip Durell handpicked the stock for our Inside Value subscribers in March 2005, and it has rewarded readers with a 63.5% return since then, much better than the S&P 500 over the same period. Is the stock fully valued today? I'd have to defer to Philip on that question. (And a 30-day free trial is available. Give it shot to see what our team of value hounds thinks of Intuit now.)

Competitors:

  • H&R Block
  • Microsoft (NASDAQ:MSFT)
  • Paychex (NASDAQ:PAYX)
  • Ceridian (NYSE:CEN)
  • Automatic Data Processing (NYSE:ADP)
  • BMC Software (NYSE:BMC)

Microsoft is also an Inside Value recommendation.

Fool contributor Anders Bylund holds no position in any of the companies discussed here and owes no back taxes. You can check out Anders' holdings if you like. Foolish disclosure is always in season.