Roper Technologies, Inc. ROP
Verdict: Sell. Fair value $510 against a price of $435 on 6 Jan 2026, 17% above the price.
In plain words
The case for: Narrow competitive moat provides durability. Industry tailwinds with growing market.
The case against: In 2022, Net Income was $4.54B while Operating Cash Flow was only $0.73B. This resulted in an.... The accruals ratio in 2022 was +0.122, calculated as (Net Income $4.54B - OCF $0.73B) / Total.... Net Income shows extreme volatility, jumping from $1.15B in 2021 to $4.54B in 2022, then falling to....
Main risks
- Low Return on Capital (ROE & ROIC): ROE (8.2%) and ROIC (7.4%) are very low for a software company, suggesting capital is not being deployed efficiently, possibly due to overpriced acquisitions leading to significant goodwill on the balance sheet.
- Questionable Incremental Returns (ROIIC): The 3-year ROIIC is estimated at 9.4%, which is below the 10% threshold for good capital allocation. This indicates new investments are generating mediocre returns, a red flag for an acquisitive company.
- Extreme Net Income & FCF Volatility: Net Income in 2022 ($4.54B) was ~3-4x other years, while FCF in 2022 ($0.66B) was ~3x lower than other years. This volatility, likely from a major one-time event (e.g., divestiture), obscures underlying profitability trends.
- In 2022, Net Income was $4.54B while Operating Cash Flow was only $0.73B. This resulted in an...
- The accruals ratio in 2022 was +0.122, calculated as (Net Income $4.54B - OCF $0.73B) / Total...
- In 2022, Net Income was $4.54B while Operating Cash Flow was only $0.73B. This resulted in an OCF/NI ratio of just 0.16, indicating that over $3.8B of reported earnings did not convert to cash, artificially inflating GAAP results.