Intuit: Growing Company In A Slowing Economic Environment

Aug.22.11 | About: Intuit Inc. (INTU)

Intuit (NASDAQ:INTU) is a provider of financial management, tax and online banking services for consumers, small and mid-sized businesses, accountants and financial institutions. Intuit is known for its consumer tax program, Quickbooks. Intuit's latest earnings report show signs of good things to come.

Let's highlight these positive developments:

  • Intuit has successfully grown small business and consumer revenue over the last five years. The small business division has seen compounded annual growth of 9% over the last five years. The consumer division has seen compounded annual growth of 13% over the last five years. This success has been tied to Intuit being able to cross sale multiple services to its existing customer base. This allows Intuit to increase earnings even if its customer base were to stay stagnant. This of course is not the case, There are millions of new tax payers that join the tax paying system every year.
  • Intuit is leading the charge in moving to a cloud based model. There has been great success with Quickbooks online with subscriber growth of 41% year over year. Customer conversion from Quickbooks software to the online version will be a big driver of earnings going forward. Intuit earns 200% more per online subscriber compared to the software version.
  • I'm expecting subscriber growth through new channels of distribution like mobile devices. Mobile applications are the way of the future and Intuit is one of the first market movers in this segment. This advantage will benefit the company greatly by expanding its dominance in this market.
  • Intuit recently announced a $2 billion share buyback. It also announced a dividend for the first time that will start in 2012. I view this as a big boost of confidence from management in its execution going forward.

Intuit is a buy for me and I think that it presents a great opportunity to invest in a growing company within a slowing economic environment. Yes, there could be less taxpayers due to layoffs and slower hiring but I don't believe that should be a big drag on earnings. The trend to online filing is the future and Intuit will be the big recipient of that trend.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.