Let's talk about the popular Roper Technologies, Inc. (NYSE:ROP). The company's shares saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Roper Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Roper Technologies?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Roper Technologies’s ratio of 45.91x is above its peer average of 32.93x, which suggests the stock is trading at a higher price compared to the Industrials industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Roper Technologies’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Roper Technologies generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Roper Technologies' earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in ROP’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe ROP should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ROP for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ROP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Roper Technologies, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Roper Technologies.
If you are no longer interested in Roper Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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