Though we're impressed with the wide-moat company, the stock is currently overvalued today.
By Andrew Lange | 05-23-17 | 11:10 PM | Email Article

 Intuit  reported good third-quarter results despite IRS returns being relatively flat year over year and anticipated share gains not eventuating in the do-it-yourself consumer tax category. Still, the seasonally significant quarter was bolstered by clients adopting higher value consumer tax product tiers, which led to tax revenue growth exceeding unit growth, and strong QuickBooks Online subscriber growth. Significantly, Intuit raised its full-year QuickBooks Online subscriber outlook to 2.3 million from a prior midpoint of 2.1 million, pointing to good small business product adoption and revenue growth for the Small Business Online Ecosystem. With consumer tax hitting the high end of management’s guidance for the third quarter and the Small Business Group performing admirably, the company raised its full-year revenue forecast and narrowed its EPS outlook toward the high end of prior expectations. 

Andrew Lange is an equity analyst for Morningstar.

After adjusting our model to account for management’s updated outlook and implementing a significant income tax adjustment from fiscal 2018 onwards, we are raising our fair value estimate to $114 from $98 and maintaining our wide economic moat rating. Nevertheless, we believe the stock is currently overvalued and would not commit new capital to the name.

For the quarter, revenue rose 10% year over year to $2.54 billion. Small Business Online Ecosystem’s 30% revenue growth supported good growth for the Small Business group, which also included solid performances from Online Payroll and Payments. We think Intuit’s online strategy remains a strong long-term growth driver and will help as it pushes to become the operating system behind small businesses.

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