1 Growth Stock to Buy and Hold Forever

Intuit (INTU -1.43%) is the gold standard in tax preparation and accounting software. The company's portfolio includes well-known brands like TurboTax and QuickBooks, and its recent acquisitions of Credit Karma and Mailchimp could be significant growth drivers in the years ahead.

In this Backstage Pass episode, which was recorded on Nov. 18, 2021, Motley Fool contributors Toby Bordelon and Brian Withers discuss Intuit's third-quarter financial performance, highlighting the potential risks and opportunities that lie ahead.

Toby Bordelon: We have Intuit earnings, and they are pretty good. Let me do something quick. I just want to double-check stock price before I actually share my screen here. What did they do in after hours. Ah, pretty good. Currently up around 9% in after-hours trading. Because you know why they were up, Brian, because this with a beat and a raise, so they did really well.

Solid quarter for Intuit, very solid quarter. This is their first quarter, Q1 2022 fiscal year. I have a space there I didn't mean to. But anyway, $2 billion in revenue for the quarter. Earnings per share are up, outlook. That should be actually the full year, not to second quarter. That will be an astonishing increase.

Brian Withers: That would be an impressive quarter-over-quarter.

Toby Bordelon: That is not correct. Fiscal year, full-year 2022, they're looking at $12.2 billion, $12.3 billion in revenue. Now if you annualized what they did in Q1, you see how they're expecting growth. That's going to be pretty solid. That by the way, I think that includes Credit Karma. I don't think that information includes Mailchimp yet, but I'm not 100 percent sure about that because it hasn't closed. The acquisitions hasn't closed yet.

Speaking of acquisitions, they've done several. They've got the Credit Karma acquisition. Credit Karma actually achieved a quarterly record this past quarter. That's showing solid growth, good acquisition, they keep growing that revenue. Mailchimp is out there, that debt you see, that $4.7 billion credit agreement, they've previously disclosed they're were going to raise money or do a credit agreement to help fund the Mailchimp acquisition. That's what that is all about. That's not anything surprising that we didn't already know. A little bit of concern about that debt increase, but I think they can handle it. It doesn't seem to be that big of an issue.

I do have some concerns by integrating these acquisitions. These are pretty big and they're pretty rapid. First Credit Karma and now Mailchimp. I don't want to get distracted and I really hope I don't hear next quarter, "We're doing another major acquisition." Let's get some integration going before we start getting crazy here. But let me comment on the revenue real quickly here, because I think what a lot of people think of Intuit, their first thought is TurboTax. That's what everyone knows from this. That's what the consumers are familiar with when you think Intuit.

We saw the revenue, they got $2 billion in revenue. The small-business and self-employed group, which includes QuickBooks, was up 22% to $1.4 billion. That's most of the revenue, Brian, that's well over 50%. The Consumer Group, which is where TurboTax lives, $120 million in revenue for the quarter. Now granted, this was the most recent quarter, so we're not in tax season yet, so sure. You expect people to be buying that software or using that software closer to the end of the year, or the beginning of next year is when you really expect that to be coming in.

But still, you see that relative to the overall business. This is not a consumer business, really. It's more of a B2B business. That's where the money is being made. I want people to understand that. There is just so much more than TurboTax, especially with Mailchimp, especially with Credit Karma is more of a consumer side, too, but they've got a lot going on and it's a lot more than you might think, if not too familiar with it, if all you understand is the brand name and that TurboTax product.

Expenses went up. Let me just go through some numbers really quickly here. I won't take too much time. But again, remember that 52% increase in revenue. Cost of revenue up 63%, marketing up 52%, R&D up 63%, admin up 55%. We're seeing marketing the same percentage increase. Everything else is going up more than revenue. A little bit of concern there, but again, I don't want to harp on it too much. I want to get through these acquisition integrations with a lot of those costs, or acquisition-related, so when I get through that and get back to our steady-state growing this business again, without these big acquisitions messing up the numbers here. Pretty good, I think. I like what I'm seeing.

Brian Withers: We did a deep dive on these guys back in June, and I kind of had that same impression that you were referring to as, "Hey this is the TurboTax company." But man, they got a lot going on and they are $178 billion market cap and have continued to put up smart growth and are focused on that business segment. We all liked it back in June, and I don't see any reason why you wouldn't still like it.