Choosing two profitable stocks amongst a myriad of potential alternatives is a daunting task to say the least. In order to narrow my choices from thousands to two, I examined several aspects of companies I was interested in. Among these were, company overview, alpha and beta ratings, price ratios, price charts, and company headlines.
After evaluating this information, I chose Intuit INC (INTU) listed on the NASDAQ and Johnson and Johnson (JNJ) listed on the NYSE. Intuit, Inc. Intuit, Inc. s a provider of small business, tax preparation and personal finance software products and Web-based services that simplify complex financial tasks for consumers, small businesses and accounting professionals. The Company’s principal products and services include Quicken, QuickBooks, Quicken TurboTax, ProSeries, Lacerte and Quicken Loans. Intuit offers products and services in five principal business divisions which include Small Business, Tax, Personal Finance, Quicken Loans and Global Business (Market Guide).
Intuit develops, sells and supports small business accounting, tax preparation and consumer finance desktop software products, financial supplies, and Internet-based products and services for individuals and small businesses. This past fiscal year ended on 7/31/02 and revenues rose 18% to $1. 36 billion. Net income from continuing operations totaled $69. 8 million vs. a loss of $118. 1 million. Results reflected higher quicken loans division sales and lower acquisition-related charges. (Market Guide) Inuit has continually met or surpassed previous financial estimates in a time when most companies are barely staying out of the red.
On 9/8/02 Inuit, Inc had an Alpha rating of . 0084 indicating it was performing better than previously estimated. Intuit also had a Beta rating of . 24 indicating its volatility had decreased. This beta indicates that the company could possibly increase or decrease . 76% less than the index. Due to this small Beta, Intuit is of relatively low risk as it is independent of the motion of the index. Inuit has a Relative Performance Rating of 53. 81. This stock overperforms the NASDAQ 100 INDEX by 53. 81 %. Intuit has gained 7. 9% since December 31.
The current price of Inuit was $45. 900 with a P/E of 29. 61. The stocks fair value using its P/E Ratio was dismal at $24. 58. From a fundamentalist view the stock should be sold as it is over inflated above its fair value. However, I believe Inuits high performance financials will attract more buyers who will continue to push the price up even further. These trends can be seen when examining the candlestick chart. The Candlestick chart has formed a Bullish pattern which suggests that buyers are entering into the stock.
The stock should continue higher for the short-term. By looking at Intuits charts we can observe that Intuit has had steady gains despite a period of loss between mid-July and mid-August. We can also see that it has a Support at 43. 44 and Resistance at 47. 42. If it breaks this resistance the stock should continue higher to 50. 13. The close proximity of resistance at 47. 42 will be focused on as a possible refraction from this level may occur. On October 1, 2002 the chairman of the executive committee sold 200,000 shares of stock in the company.
Although this may make some investors uneasy, Inuit came out earlier last month and said its fiscal 2003 revenue and profit will be in line with its expectations. On September 25, Intuit announced that the connectivity of Quicken Software for Windows to financial institutions via Open Financial Exchange (OFX) has surpassed the 2,000 mark. This connectivity, more than any other personal finance software product on the market, allows over 15 million Quicken for Windows customers to download their financial transactions via secure connections directly from banks, credit card companies, and brokerages.
Financial institutions that connect to Intuit’s latest versions of Quicken for Macintosh and QuickBooks also do so via Open Financial Exchange. It is clear that Intuit is quickly taking lead in the financial software industry. I see Intuit as a strong buy for both the short and long term periods. It has been consistently outperforming both its 50 and 200 day trading averages. The company has good financial estimates and encouraging monetary gains. In todays bear market, Intuit has steadily made positive returns.