Author Topic: ROP - Roper Technologies  (Read 15576 times)

giofranchi

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ROP - Roper Technologies
« on: August 03, 2015, 03:11:35 AM »
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Roper Technologies
Roper Technologies is one of the best capital allocators among industrial companies. Over the last 10 years, the company has produced an annualized shareholder return of 18% vs. the S&P 500ís return of 6%. Roperís management team has created tremendous value by deploying in excess of 100% of its FCF to acquire asset-light, cash-generative growth companies with strong competitive moats.

Acquired businesses have flourished under Roperís decentralized and entrepreneurial management approach. Business managers are equipped with ĎRoper Strategic Focusí tools to expand market share and have strong financial incentives to improve operating performance every year. An emphasis on management continuity ensures that managers donít trade long-term growth investments for short-term profits.

Roper also boasts the highest returns-on-capital and profit margins among multi-industry companies. Many business units have a high percentage of recurring revenue and very high market share in their respective niche markets. Roperís organic revenue growth rate has averaged 6% over the last 10 years. Recent healthcare technology acquisitions including Sunquest and MHA have enhanced the groupís organic growth profile and reduced the cyclicality of Roperís cash flows.

We are confident that Roperís management team can continue to generate excess returns through a combination of capital deployment and operating excellence. We expect Roper to grow earnings organically at a high-single digit rate through the next economic cycle. If management is able to deliver on its target to deploy 100% of annual FCF, future acquisitions can potentially generate 7 Ė 8% annual earnings accretion. This combination positions Roper to compound earnings at a 15% CAGR, making Roper a continuing core position in our portfolio.
--Daniel Loeb, Q2 2015 Letter

From the website of ROP:
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Roper is a diversified technology company. The Company enjoys leadership positions in diverse niche markets and serves a broad customer base. Outstanding operational execution results in superior profitability and compelling cash flow, which, in turn, is deployed to create shareholder value. This asset-light, cash-focused business model has produced consistent growth for more than a decade.

Jellison is 69 and could be at the helm for the next decade.

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Gio
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Phaceliacapital

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Re: ROP - Roper Technologies
« Reply #1 on: August 03, 2015, 03:33:20 AM »
I think the company is also a Pat Dorsey favourite.
The harder you work, the luckier you get.

berkshire101

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Re: ROP - Roper Technologies
« Reply #2 on: August 03, 2015, 07:56:51 AM »
ROP has been on my watchlist for a while.  It's a fantastic company, one of those diversified industrials that has that platform/acquisition strategy.  However, it's always appears expensive, above 20 times FCF.  What's a fair price for this great business?

no_free_lunch

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Re: ROP - Roper Technologies
« Reply #3 on: August 05, 2015, 11:05:34 AM »
Another one that I have on my list and seems to be in the same general category (they buy up competitors and improve operating metrics in a boring industry) as Roper is Middleby (MIDD).  MIDD is something like a 600x since 1992.   If either ever has a significant price drop I would be a buyer.
« Last Edit: August 05, 2015, 11:07:06 AM by no_free_lunch »

Schwab711

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Re: ROP - Roper Technologies
« Reply #4 on: August 05, 2015, 11:31:41 AM »
Another one that I have on my list and seems to be in the same general category (they buy up competitors and improve operating metrics in a boring industry) as Roper is Middleby (MIDD).  MIDD is something like a 600x since 1992.   If either ever has a significant price drop I would be a buyer.

If you have any useful info on MIDD then please start a thread. I think it would be really useful since MIDD is on my great company watchlist and they look phenomenal on paper. I know everyone uses their products (and not much more), but I don't know why (are they going to require constant innovation?).

I'm watching ROP now, but I still don't understand their advantage, if any exists. Management appears to be an excellent asset (should be added to excellent management team thread) but would their businesses be as strong without them?

kapilm

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Re: ROP - Roper Technologies
« Reply #5 on: October 06, 2017, 10:06:55 AM »
Has anyone looked at Roper Tech, industrial PE-style conglomerate? Not cheap by any measure but its a cash generating machine. Business model is similar to BRK with each of the subs operating independently. They focus on CRI (cash return on investment) similar to CFROI which looks like a great metric to evaluate businesses. Would be curious to hear any thoughts on this name. Thanks.

LongTermView

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Re: ROP - Roper Technologies
« Reply #6 on: October 06, 2017, 04:21:26 PM »
They came up for me on a screen but I haven't looked at them all that deeply.

scorpioncapital

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Re: ROP - Roper Technologies
« Reply #7 on: October 07, 2017, 04:38:26 AM »
Yes I've owned Roper for a while and they are a well run conglomerate. They remind me a bit of Danaher albeit more industrial software angle. I don't know how they'll do in the next recession but in the last one earnings fell off a ledge when others fell off a cliff :)

« Last Edit: October 07, 2017, 04:55:39 AM by scorpioncapital »

Broeb22

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Re: ROP - Roper Technologies
« Reply #8 on: October 08, 2017, 04:03:26 PM »
I've attached some research I did 2 years ago on the business.

The CEO earns PE-type comp, but he also owns $600MM in stock, which I love.

They are not buying assets cheap at the outset, but I think their mindset is 1) they can improve margins in some cases and 2) most importantly, niche software assets can grow cash flows with slight organic tailwinds and a few points of pricing power annually. This feature of software businesses makes their CRI metric look very impressive.

I like the business and own stock. It's a little bit of Danaher, and a little bit of Constellation Software. Valuation is not cheap today, so not sure I'd be buying. But with a business that can probably compound at low-double digits going forward, you have to think about buying this compared to comps like Moody's or Dun & Bradstreet, where the businesses generate so much cash relative to ongoing investment needs. With those in mind, the stock is not so excessively expensive.

A big concern for me going forward is what the acquisition pool looks like, similar to what some say about CSU. Given some of the large mature software companies out there, the runway is probably long, but they're less likely to get any screaming bargains the larger their acquisitions get either.

villainx

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Re: ROP - Roper Technologies
« Reply #9 on: October 08, 2017, 08:49:05 PM »
Any metric particularly useful in looking at whether ROP is fair/over/under priced?  I long looked at ROP but couldn't figure on where is a decent valuation to start a position.