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Roper (ROP) Displays Bright Prospects, Headwinds Persist

On Mar 8, we issued an updated research report on Roper Technologies, Inc. ROP.

In the past six months, this Zacks Rank #3 (Hold) stock has lost 2.7% against the industry’s growth of 21.6%.

Present Scenario

Roper is poised to benefit from strength across its network software and medical product businesses. Also, the company’s continued focus on investing for long-term and sustainable organic growth, along with product innovations, is likely to be beneficial. Notably, for 2021, it anticipates organic revenues for its Application Software, Network Software & Systems as well as Measurement & Analytical Solutions segments to grow in the mid-single-digit range.  

Moreover, its acquisition of Vertafore (September 2020) will help it in generating revenues of $590 million and earnings before interest, tax, depreciation and amortization (EBITDA) of $290 million in 2021. Also, its buyout of WELIS and Impact Financial Systems (both in September 2020) will expand its suite of SaaS-based solution offerings for the life insurance and financial services industry. In addition, in October 2020, it acquired EPSi, which will enhance its Strata business’ offerings in the healthcare industry.

Further, it remains committed to rewarding shareholders handsomely through dividend payments. In 2020, it paid out dividends worth $214.1 million. In addition, it increased the quarterly dividend rate by 10% or 5 cents per share to 56.25 cents in November 2020.

However, near-term end market challenges are likely to hurt the performance of its Network Software & Systems and Process Technologies segments in the first quarter. Notably, for the first quarter of 2021, Roper predicts organic sales decline of 3-5% year over year for Network Software & Systems. Also, organic sales from Process Technologies are expected to decrease 10% in the quarter.

Further, its high-debt profile poses a concern. Exiting 2020, its long-term debt (net of current portion) was $9,064.5 million, up from $4,673.1 million at 2019-end.

Key Picks

Some better-ranked stocks from the same space are EnPro Industries, Inc. NPO, Applied Industrial Technologies, Inc. AIT and Dover Corporation DOV. While EnPro currently sports a Zacks Rank #1 (Strong Buy), Applied Industrial and Dover carry a Zacks Rank #2 (Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

EnPro delivered a positive earnings surprise of 310.81%, on average, in the trailing four quarters.

Applied Industrial delivered a positive earnings surprise of 21.92%, on average, in the trailing four quarters.

Dover delivered a positive earnings surprise of 20.01%, on average, in the trailing four quarters.

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Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report
 
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Roper Technologies, Inc. (ROP): Free Stock Analysis Report
 
EnPro Industries (NPO): Free Stock Analysis Report
 
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