Roper's Revenues Up Y/Y, Debt Woes Linger: Time to Invest? - Analyst Blog
We issued an updated research report on Roper Industries, Inc. ROP on May 19, 2015.
The company reported encouraging first-quarter 2015 results with both revenues and earnings growing on a year-over-year basis. However, its balance sheet was highly leveraged at quarter-end.
Roper has expanded its business primarily through accretive acquisitions. In 2014, acquisitions contributed 3% each to revenues and order growth. So far in 2015, Roper has completed three acquisitions worth a total of $590 million which are likely to yield about $100 million in revenues per year. The company has an optimum mix of highly engineered, niche-oriented products which help it to gain market share.
Another key factor driving growth for the company is its unique asset-light business model that lowers its dependence on large-scale production equipment. This enables the company to remain profitable even when sales are declining during recession. The asset-light business model also enables Roper to generate strong cash flow helping the company to increase dividend payout, going forward.
However, apart from high-debt levels, macroeconomic concerns, integration issues due to acquisitions and intensifying competition remain the headwinds. Also, the frequent acquisitions may negatively impact its balance sheet in the form of a high level of goodwill. As of Mar 31, 2015, total debt was $2.6 billion. The high debt burden may limit future expansion and aggravate the company’s risk profile.
Furthermore, stiff competition from the likes of Danaher Corp. DHR, Dover Corp. DOV and Ingersoll-Rand Plc IR remains a concern.
Roper currently has a Zacks Rank #3 (Hold).
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