Shareholders of Intuit would probably like to forget the past six months even happened. The stock dropped 44.4% and now trades at $389.83. This may have investors wondering how to approach the situation.

Following the pullback, is this a buying opportunity for INTU? Find out in our full research report, it’s free.

Why Does Intuit Spark Debate?

Originally named after its founding product "Intuitive for the first-time user," Intuit (NASDAQ: INTU) provides financial management software and services including TurboTax, QuickBooks, Credit Karma, and Mailchimp to help consumers and small businesses manage their finances.

Two Positive Attributes:

1. Billings Growth Boosts Cash On Hand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Intuit’s billings punched in at $3.91 billion in Q3, and over the last four quarters, its year-on-year growth averaged 17.8%. This performance was solid, indicating robust customer demand. The cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

2. Operating Margin Reveals a Well-Run Organization

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

Intuit has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 26.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

One Reason to be Careful:

Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Intuit’s revenue to rise by 12%, a slight deceleration versus its 19.9% annualized growth for the past five years. This projection is underwhelming and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

Final Judgment

Intuit’s merits more than compensate for its flaws. With the recent decline, the stock trades at 4.9× forward price-to-sales (or $389.83 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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