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Stock focus: Is Intuit cheap?

Thousands of investors keeping track of their finances with Quicken software may have a hot stock sitting right under their noses.

Thousands of investors keeping track of their finances with Quicken software may have a hot stock sitting right under their noses.

Shares of Intuit, the maker of Quicken and other finance software, are trading well below their 52-week high and have a relatively low price-to-earnings ratio. In addition, the company's software consistently ranks among the best sellers, which begs the question: Is it time to buy?

Not yet, say some analysts.

"There is no upside to this stock over the next two quarters," said Bryan Keane, and analyst at Prudential Volpe Technology. "You might have to be patient with it for the next three to four months."

Longer term, however, Intuit does have some plans that could be attractive to investors.

Shares in the company closed at $35.56 today, 60 percent below their 52-week high of $90 but above the one-year low of $22.50.

According to Bloomberg, the stock has a price-to-earnings ratio of 74.6 compared with 152 for the entire tech-heavy Nasdaq composite index.

Besides Quicken, Mountain View, Calif.-based Intuit makes QuickBooks for businesses and TurboTax.

According to market research firm PC Data, four Intuit products ranked among the top 10 software applications of 1999, more than any other company. The company also took nine of the top 20 slots last month, primarily because of strong sales of its tax-preparation software.

Intuit plans to move more of its products and services onto the Web, and has already established a significant following. According to Net traffic measurement firm Media Metrix, about 4.4 million unique users visited last February, slightly more than the 4.3 million visitors to Microsoft's

Intuit eventually wants to move all of its "functionality" onto the Web. Instead of buying and installing TurboTax, for example, a customer could skip the store and be able to prepare and file returns entirely via the company's Web site.

The company also plans to offer more services, such as those for handling mortgages and insurance. By moving more aggressively to the Net and rounding out its product line, Intuit hopes to even out the cyclical nature of the company's revenue streams, it said.

For example, the company generated about $599.7 million in the second and third quarters during fiscal year 1999, which coincides with tax season, but revenues for the first and fourth quarters totaled $261.9 million.

How the company handles the migration to the Net is crucial. "The biggest risk in my mind is the transition from a traditional business to an Internet business...the risk is how they execute," said David Farina, an analyst for William Blair.

One key hurdle: convincing customers that the Web can safely handle sensitive financial transactions.

It's yet to be seen whether "consumers will aggregate accounts and go to one place for financial services," said Scott Appleby, an analyst at Robertson Stephens. Appleby said customers eventually will prefer to use one site for all of their financial services, but when and with whom has not been determined.

In addition, the competition is formidable, as Microsoft, Yahoo, H&R Block and others plan to offer similar services online. But Intuit's strong brand recognition is certainly a plus.

QuickBooks has more than 80 percent of the market for small-business accounting software. The small business market "is where the growth and sizzle of this story reside," said analyst Michael Hodes of Goldman Sachs.

"We are not pounding the table on this stock right now," Hodes said, "but we are warming up to it at these (valuation) levels."

Added Farina: "The stock has been oversold and hit pretty hard in the sell-off. But in this kind of investing environment, you want to trade up, and Intuit is the company to do it with."

Prudential's Keane thinks the company will meet analysts' earnings expectations for the next two quarters. That alone could keep investors on the sidelines given the overall turmoil in the market.