Is Roper Technologies a Hidden Gem or an Overpriced Stock?

At a time when tech stocks are surging, it’s somewhat rare to find a technology company that hasn’t advanced by double or even triple digits in the last 12 months. Today, however, we’ll be looking at one that has remained largely flat even as investors poured into practically every tech company they could find.

Roper Technologies (NYSE:ROP) has advanced less than 6 percent in the last 12 months despite solid revenue and earnings growth. How is Roper Technologies performing, and is the stock a buy, a sell or a hold after its lackluster returns in the past year?

Key Points

• Revenue grew from $2B to $7B in 15 years, net margins doubled to 22%, and EPS more than doubled in a decade, showcasing strong financial performance.

• Despite a high valuation (40x earnings), steady 10% annual EPS growth and M&A-driven expansion support long-term returns.

• A low 0.5% yield is offset by a 13.7% annual dividend growth rate and a low 20.8% payout ratio, signaling strong future increases.

What Does Roper Technologies Do?

While Roper has owned and operated many business lines throughout its history, the company today is primarily a maker of commercial and industrial software. Roper currently makes software for everything from transportation management to the entertainment industry. This focus on digital services and software has allowed Roper to build a diversified portfolio of businesses that deliver solid financial performance. Roper Technologies has also shown a proclivity for acquisitions that add to its software portfolio, a strategy that has been on full display recently.

Does Rope Trade Low or High?

By most metrics, Roper Technologies is somewhat on the expensive side. The stock currently trades at 40.0 times earnings, 8.8 times sales and 3.3 times book. The price-to-earnings-growth ratio of 3.6 could also indicate overvaluation, as the stock is priced at a higher multiple than its expected forward growth may justify.

Analyst price forecasts, though, don’t seem to indicate overvaluation in ROP. The stock’s average price target for the coming 12 months is $620.50, an 8.2 percent increase from the most recent price of $573.58. While this certainly isn’t an enormous amount of upside, most Wall Street analysts don’t seem to believe that the stock is actively overpriced at its current level. Additionally, ROP holds 8 buy ratings, 6 hold ratings and 0 sell ratings from analysts.

Revenues Are Up Big In Past 15 Years

Roper Technologies has maintained what might be best described as slow and steady revenue growth over a period of many years. While it hasn’t exploded in the way that many tech companies do, Roper has been able to gradually build its 12-month revenues from just over $2 billion around 15 years ago to slightly over $7 billion today. While revenue growth turned negative between 2019 and 2021, Roper not only regained the revenues it was delivering before the drop but also went on to significantly exceed them.

Another gradual trend that has added up to significant improvements for Roper Technologies shareholders is the company’s gradual expansion of its net margin. In 2010, the company was delivering about 12.5 percent in net margin. Today, that number has expanded to about 22 percent. This increase in net margins has been a bit choppier than the company’s revenue increase, but in both cases the overall trend has been one of gradual improvement.

As one might expect, the gradual expansion of both revenues and net margins over many years has had some extremely noticeable effects on Roper’s earnings per share. In 2015, for instance, the company reported EPS of $6.85 for the full year. Fast forward a bit less than 10 years, and that number has more than doubled to a total of $14.34 for 2024.

Q4 of last year was a particularly good one for Roper Technologies. Revenue rose 16 percent year-over-year, driven primarily by a 9 percent contribution from new software acquisitions. Net income, meanwhile, rose 22 percent to $462 million. Both of these results showed that Roper’s longstanding slow-and-steady growth was beginning to accelerate, a fact that could support higher share prices going forward.

For 2025, management expects to see revenue grow by about 10 percent. As with 2024, 2025 is expected to be helped by continued M&A activity as Roper keeps expanding its portfolio of software products. Organic growth is also expected to provide headwinds for Roper as it continues to build the value of its existing software businesses.

Over the coming five years, analysts expect to see earnings per share at Roper Technologies rise by about 10 percent per year. While this certainly isn’t earth-shattering growth, the continued gradual advance of Roper’s EPS could help the stock keep moving higher over the years to come.

Is Roper’s Dividend Growth Worth It?

Another notable feature of Roper Technologies is its dividend growth potential. Right now, ROP offers a fairly modest yield of 0.5 percent, equating to $3.00 per share annually. The real story where Roper’s dividend is concerned, though, is in its growth. Over the last 10 years, Roper’s management has expanded the payout at an annualized rate of 13.7 percent. Even with this rapid rate of growth, though, Roper’s payout ratio is still just 20.8 percent. As a result, the company could continue to raise its dividends at an attractive pace for dividend growth investors for years to come.

Is Roper Technologies a Buy, Sell or Hold?

Although Roper Technologies stock does look fairly expensive at first glance, the company’s growing revenues, expanding net margins and long history of delivering steady gains likely make it worth a deeper look. The company’s strategy of acquiring new software products and adding them to its existing portfolio has proven quite successful, and management appears to be dedicated to continuing this strategy into 2025 and beyond.

Adding significantly to this is the potential for a long series of dividend increases ahead as Roper Technologies continues to build its net income. With the payout ratio just over 20 percent, management has plenty of room left for future dividend increases. Between this and a double-digit dividend growth rate stretching back over the last decade, ROP could be quite appealing to dividend growth investors looking for stocks to buy and hold for long periods of time.

With so much working in its favor, Roper Technologies seems to justify the high prices it currently trades at. Though it’s unlikely that the company will produce fast, dramatic returns, Roper has many of the potential makings of a long-term compounding stock. As such, the stock could be a decent buy today, particularly for those seeking dividend growth on a long time horizon.