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Roper Technologies: Great Business, Greatly Overvalued

May 02, 2021 10:56 AM ETRoper Technologies, Inc. (ROP)16 Comments
Cash-Centered Creep profile picture
Cash-Centered Creep


  • Roper Technologies is trading at a 31% premium to fair value.
  • It is an S&P 500 Dividend Aristocrat and a leader in various fringe end markets in the industrial sector.
  • It is a hold, but not a buy at present.

Optimisation of business and industrial process workflow and automation. Development of sofware for automatization managment. Gears on virtual screen.
Photo by Traitov/iStock via Getty Images

Roper Technologies (NASDAQ:ROP) is an appealing stock choice for a number of reasons. However, no stock should be bought at any price, and the price that Roper Technologies trades at currently is sufficient to disqualify it

This article was written by

Cash-Centered Creep profile picture
Buy and hold, common stock investor focused on dividends and on value. Interested in various stocks that are suitable for long-term dividend investment. A Buffett admirer, but not a Buffett cultist, and not quite as creepy as my name implies - though certainly cash-centered!

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (16)

Some weeks back, one of ROP's Board Members bought a large number of shares @453. Have you checked the price recently?
0xfc profile picture
Well one might say looking at the price today it is over valued. Yes this upcoming earnings should beat by a few cents but we are definitely not seeing the growth in rev it had in the past. It is steadily slowing down year after year.
I have owned ROP since about 1993. It was overpriced when I bought it. It has always had about a 1/2 % yield. It has appreciated about 25x my purchase price.
As Buffet once said, “You must pay up for quality.”
Glad I got in at much lower prices.
No immediate plans to sell.
Well, very nice calculation. Unfortunately it doesn't mean much. I can also come with a very nice DCF model, where with a few tweaks on growth rate and discount rate I will come to a conclusion that Roper is 31% undervalued. Just because something can be calculated, does not make it accurate or correct. Roper's business model with the upfront payment of license "float" which provides for negative working capital, the very low capital intensity / reinvestment requirement of existing businesses, the growth rate and a a great track record of compounding are far more important qualitative factors. So is Roper overvalued? Possibly. Will it continue compounding at double digit %. Very likely. So I would say for long term investors like myself with a 5-10 year horizon, the likelihood of getting a nice return is high.
Morningstar has Roper at fair value. Actually slights less than fair value.
I tend to agree with the author. Quality compounder whose prospects are currently well discounted by the market. I’m a long term holder and recently trimmed 10% of my gains. Happy to hold with the remaining stake. Excellent company.
Ian Bezek profile picture
Has Roper ever traded at "fair value" under this approach? I don't think using a market median multiple of 15x is applicable for a software company like Roper that grows at 15% a year.
Mick Research profile picture
@Ian Bezek According to FastGraph, Roper has been growing earnings at ~14% p.a. in the last 20 years, while trading on average at a 23 PE. It is now trading at a 33 PE (that is, 50% more) while growth is slowing down.
@Mick Research Firstly, Roper’s p/e has been in the high 20s since 2016. Secondly, I’m sure you’ve noticed that every stock is valued much higher than normal this year so why shouldn’t Roper be?

Morningstar, conservative, cash flow conscious and far more authoritative than you or I, has it at 5% undervalued still. Excellent company, long term cash compounder, comfortably better performing over the long term than the market overall.
Office Rat profile picture
@Betternotbigger "I’m sure you’ve noticed that every stock is valued much higher than normal this year so why shouldn’t Roper be?" That doesn't make Roper fairly valued, it just means most other stocks are overvalued as well.
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