Summary
- Roper Technologies has grown its business and expanded its margins over time. This has been driven by numerous strategic acquisitions.
- The balance sheet has become stretched, and the company's CROCI has declined. Due to the company's cash flow and pending divestitures, we maintain bullish outlook.
- The stock has appreciated 10% in January. This has placed shares just out of range of our target price. Roper Technologies is a fantastic company worthy of your watch list.
We recently evaluated Roper Technologies, Inc. (ROP) as part of our dividend champion spotlight series. The company that provides niche technology solutions utilizes a growth strategy that strongly features acquisitions. This has helped the company grow at a rapid pace. However, this strategy has cost the business in some ways. The balance sheet has recently stretched, and Roper's cash rate of return on capital has declined. Now that Roper has wrapped up its fiscal year, we evaluate whether these trends are cause for concern, and whether the stock presents an opportunity to investors at the present time.
Roper has built somewhat of a growth engine that feeds itself over the past decade. Management has targeted (and acquired) asset light, cash flow rich assets that operate in synergistic niche markets. These assets boost the overall cash generation of Roper's business, which results in more cash being utilized to help fund the next acquisition.
