QUOTE AND NEWS
TheStreet.com  Oct 27  Comment 
NEW YORK (TheStreet) -- Roper Industries shares are experiencing volatility in trading on Monday following the release of the company's third quarter earnings results today. The company's stock has fluctuated between reaching all time highs...
newratings.com  Oct 27  Comment 
WASHINGTON (dpa-AFX) - Industrial solutions provider Roper Industries, Inc. (ROP) reported Monday a profit for the third quarter that increased 14 percent from last year, driven by improved margins and higher sales amid new order growth. Adjusted...
Forbes  Oct 24  Comment 
Wall Street is high on Roper Industries, expecting it to report earnings that are up 8% from a year ago when it reports its third-quarter earnings on Monday, October 27, 2014. The consensus estimate is $1.53 per share, up from earnings of $1.42...
Market Intelligence Center  Oct 1  Comment 
A covered call identified by MarketIntelligececenter.com's patented algorithm on Roper Industries Inc. (ROP) could yield about 2.26% (15.89% annualized, for comparison purposes only) in 52 days. Pair a long position in the stock with the Nov. '14...
Market Intelligence Center  Sep 17  Comment 
Roper Industries Inc. (ROP) traded between $146.77 and $148.46 before closing at $147.88 Tuesday and presents some attractive trading opportunities today. MarketIntelligenceCenter.com’s patented algorithms selected a Nov. '14 $145.00 covered...
Market Intelligence Center  Sep 4  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Roper Industries Inc. (ROP) that should provide a 3.34% return in just 169 days. Sell one Feb. '15 call at the $145.00 level for each 100...
DailyFinance  Aug 27  Comment 
Harris Williams & Co., a preeminent middle market investment bank focused on the advisory needs of clients worldwide, announces the sale of IPA, LLC (IPA), the leading manufacturer of automated scrub suit and linen...
Cloud Computing  Aug 27  Comment 
CHICAGO and NEW YORK , Aug. 27, 2014 /PRNewswire/ -- Cressey & Company LP ("C&C"), a leading healthcare-focused private investment firm, and Level Equity Management, LLC ("Level Equity"), a leading software-oriented growth equity firm, today...
Cloud Computing  Aug 26  Comment 
SARASOTA, Fla. , Aug. 26, 2014 /PRNewswire/ -- Roper Industries, Inc. (NYSE: ROP) today announced that it has acquired Strategic Healthcare Programs, LLC (SHP) and Innovative Product Achievements, LLC (IPA).  Both companies will become part of...




 

Roper Industries (NYSE:ROP) makes devices to control and monitor energy usage, radio frequency identification (RFID) devices used in toll and traffic systems across North America, and industrial testing and metering equipment for materials analysis and flow measurement.[1] In 2007, the company had sales of $2.1 billion, a net income of $250 million and a net profit margin of 11.9%.[2]

Over the last two years, Roper Industries grew its sales orders by 18.4% and reinvested its free cash flows in acquisitions. From January 2006 to March 2008, the company acquired eleven businesses under its four business segments for a total of $813 million.[3]

In February 2008, Roper Industries paid $367 million to acquire CBORD, a leading supplier of card and integrated security systems in Australia, Europe and North America.[4] The acquisition of CBORD gives the company's RF Technology segment access to approximately 2,500 institutional clients in the health care and higher education markets.[5]

When acquiring companies, Roper Industries targets businesses like CBORD that operate in stable, high growth markets and have a stable customer base. As a result, 80% of Roper's revenues were recurring in 2007 and it retained 95% of its customers in the same year.[6]

Company Overview

As mentioned above, the company uses its free cash flows to fuel an acquisitive growth strategy. In 2006 and 2007, Ropers Industries acquired ten companies under its four business segments, increasing sales orders by 18.4% (8.7% due to business acquisitions and 9.7% due to internal growth). [7]

Financial Analysis

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Total Sales, Net Income and Profit Margin in 2003, 2004, 2005, 2006 and 2007 for Roper Industries, Inc.

In 2007, Roper Industries had sales of $2.1 billion, up 23.6% from $1.7 billion in 2006.[8] Its net income was $250 million with a net profit margin of 11.9%.[9] The company attributed this increase in sales to strong internal growth, full-year sales from companies acquired in 2006 (AC Controls, Dynisco, Intellitrans, Lumenera and Sinmed) and partial-year sales from companies acquired in 2007 (Black Diamond, DJ Instruments, Dynamic Instruments, JLT and Roda Deaco).[10]

In 2006, Roper Industries’ sales were up 17.0% from $1.5 billion in 2005.[11] Its net income was $193 million with a profit margin of 11.4%.[12] Again, this increase in sales was attributed to strong internal growth, full-year sales from companies acquired in 2005 (CIVCO, Inovonics and MEDTEC) and partial-year sales from companies acquired in 2006 (AC Controls, Dynisco, Intellitrans, Lumenera and Sinmed).[13]

Business Segments

Roper Industries' four business segments are Industrial Technology, Energy Systems and Controls, Scientific and Industrial Imaging and RF Technology.[14] In each of the company's four business segments, no customer was responsible for more than 10% of sales in the segment for 2007.[15]

  • Industrial Technology (30.7% of total sales and 25.6% of operating profits in 2007): The Industrial Technology segment produces industrial analysis, measuring and testing equipment at six U.S.-based and two Europe-based operating units.[16] In 2007, sales from this segment amounted to $644 million, up 17.2% from $550 million in 2006.[17] The company attributed this increase to good sales from its materials testing business and high market penetration for its new RF-integrated water meter.
  • Energy Systems and Controls (24.6% of total sales and 24.5% of operating profits in 2007): The Energy Systems and Controls segment produces energy testing, control, inspection and measurement equipment at six U.S.-based and two Europe-based operating units.[18] In 2007, sales from this segment amounted to $516 million, up 50.3% from $344 million in 2006.[19] The company attributed this increase to a strong global oil and gas market and good full- and partial-year sales from companies acquired in 2006 and 2007 respectively.
  • Scientific and Industrial Imaging (17.9% of total sales and 19.5% of operating profits in 2007): The Scientific and Industrial Imaging segment offers high-performance digital imaging and patient positioning products and software through five U.S-based and two Canada-based operating units.[20] In 2007, sales from this segment amounted to $376 million, up 11.0% from $339 million in 2006.[21] The company attributed this increase to a strong electron microscopy market and good full- and partial-year sales from companies acquired in 2006 and 2007 respectively. The increase was offset by a weak market for handheld computers and motion cameras.
  • RF Technology (26.8% of total sales and 20.7% of operating profits in 2007): The RF Technology segment provides identification and satellite-based communication products and software through three U.S.-based operating units.[22] In 2007, sales in the RF Technology segment amounted to $565 million, up 20.7% from $468 million in 2006.[23] The company attributed this success to good sales from its traffic and tolling business, which has benefited from a large project in the Middle East, together with good full- and partial-year sales from companies acquired in 2006 and 2007 respectively.
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Sales by Business Segment and Geographic Region in 2007 for Roper Industries, Inc.

Geographic Regions

In 2007, sales to customers outside the United States amounted to $858,574 or 40.8% of total sales.[24] These sales were made to customers in Canada (5.5%), Europe (18.0%), Asia (9.4%), Middle East (4.0%) and the Rest of the World (3.9%).[25]

Key Trends and Forces

High recurring revenues and customer retention rates from subsidiaries and acquisitions

Many of the company's subsidiaries and acquisitions operate in stable, high growth markets and have a stable customer base. As a result, Roper Industries currently has 80% of its revenues recurring in nature and retains 95% of its customers annually.[26] CBORD, which was acquired by Roper Industries on 21 February 2008, is a clear example of this. Prior to being acquired, CBORD made card and integrated security systems for over 750 higher education institutions and 1,700 major health care licensees, corporate campuses, supermarkets, theme parks and dining chains in the United States, Canada, Europe, South Africa, New Zealand and Australia.[27]

Focus on high growth markets results in strong free cash flows

In 2006 and 2007, Roper Industries grew sales orders by 18.4% (8.7% due to business acquisitions and 9.7% due to internal growth).[28] Almost half of this growth was achieved organically by focusing on high growth markets such as industrial technology, RF applications and medical imaging. In the case of RF applications, the market for such devices is expected to reach $5.3 billion in 2008, up 7.3% from $4.9 billion in 2007.[29] In the case of medical imaging, a global population explosion, increased aging, a rise in chronic illnesses and better awareness of medical operations will grow the market to $11.4 billion in 2012, up 48.1% from $7.7 billion in 2007.[30]

Strong free cash flows used on acquisition spree results in negative tangible book value

In 2007 alone, Roper Industries acquired Black Diamond for $6 million, DJ Instruments for $8 million, Dynamic Instruments for $31 million, JLT for $12 million and Roda Deaco for $45 million.[31] On account of this acquisition spree, more than two thirds of the company's balance sheet is tied up in intangible assets such as goodwill.[32] As of 31 December 2007, the company’s goodwill amounted to $1.7 billion as compared to $1.8 billion in stockholders’ equity, $1.7 billion in total liabilities and $3.5 billion in total assets.[33] Given that the company's intangible assets are valued at an amount that is high relative to its total assets, the company risks a major hit to its balance sheet if intangible assets are written down.

Lack of hedging results in sensitivity to foreign exchange rate fluctuations

Although several of the company's subsidiaries and acquisitions have transactions and balances denominated in currencies other than the dollar, Roper Industries does not currently hedge against foreign exchange rate risks.[34] In 2007, sales to customers outside the United States amounted to $858,574 or 40.8% of total sales. These sales were made to customers in Canada (5.5%), Europe (18.0%), Asia (9.4%), Middle East (4.0%) and the Rest of the World (3.9%).[35] As such, unfavorable changes in the exchange rates between the dollar and the currencies of these countries could significantly impact the company's sales and net income.

Competition

Most of Roper Industries' competitors are more specialized, focusing on only one or two of the company's four business segments. The most significant of these competitors is General Electric which operates in six different business segments, three of which (Infrastructure, Industrial and Healthcare) overlap closely with the company's core business segments.

Agilent Technologies produces bio-analytical and electronic measurement products for the communications, electronics, life sciences and chemical analysis industries.[36] In 2007, the company had sales of $5.4 billion, a net income of $638 million and a net profit margin of 11.8%.[37]

General Electric is a multinational corporation with products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, industrial products and media content.[38] In 2007, the company had sales of $173 billion, a net income of $22.2 billion and a net profit margin of 12.8%.[39]

PerkinElmer designs, manufactures, markets and services components, systems and products for the photonics and diagnostics, detection and analysis markets.[40] In 2007, the company had sales of $1.8 billion, a net income of $132 million and a net profit margin of 7.4%.[41]

Company Market Capitalization (in $ million) Total Sales (in $ million) Net Income (in $ million) Profit Margin
Agilent Technologies[42]$13,324$5,420$63811.8%
General Electric[43]$294,860$172,738 $22,208 12.8%
PerkinElmer[44]$3,493 $1,787 $132 7.4%
Roper Industries[45]$5,511$2,102$250 11.9%


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