Investment Thesis
Roper demonstrates exceptional operational performance with 69.4% gross margins, 27.2% operating margins, and strong 12.3% revenue growth, supported by robust FCF generation of $549.9M. However, critically low returns on equity (2.7%) and assets (1.5%), combined with weak liquidity ratios (0.53x current, 0.49x quick), suggest severe capital efficiency issues and potential balance sheet leverage from acquisitions that are not generating proportional returns.
Strengths
- Exceptional profitability margins (Gross 69.4%, Operating 27.2%, Net 24.3%)
- Strong revenue growth of 12.3% YoY demonstrating market demand
- Excellent free cash flow generation ($549.9M) with 26.2% FCF margin
- Low capital intensity (only 2% of revenue on capex) indicating asset-light model
- Moderate leverage with reasonable interest coverage (4.7x)
Risks
- Critically low return on equity (2.7%) and return on assets (1.5%) despite strong margins - indicates poor capital allocation or significant goodwill impairment
- Weak liquidity position (Current ratio 0.53x, Quick ratio 0.49x) below safe operational thresholds
- Diluted EPS declining (-1.0% YoY) despite 12.3% revenue growth suggests margin compression or unfavorable share dynamics
- Substantial $9.7B long-term debt relative to only $382.9M cash position creates refinancing risk
Key Metrics to Watch
- Return on Equity trend - critical to understand if capital inefficiency is structural or temporary
- Gross and operating margin sustainability as revenue grows
- Free cash flow generation and debt reduction trajectory
- Current ratio improvement and working capital management
Financial Metrics
Revenue
2.1B
Net Income
508.9M
EPS (Diluted)
$4.87
Free Cash Flow
549.9M
Total Assets
34.6B
Cash
382.9M
Profitability Ratios
Gross Margin
69.4%
Operating Margin
27.2%
Net Margin
24.3%
ROE
2.7%
ROA
1.5%
FCF Margin
26.2%
Balance Sheet & Liquidity
Current Ratio
0.53x
Quick Ratio
0.49x
Debt/Equity
0.52x
Debt/Assets
45.5%
Interest Coverage
4.72x
Long-term Debt
9.7B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T11:55:57.965225 |
Data as of: 2026-03-31 |
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