Shares in financial software maker Intuit (NASDAQ: INTU) were 2% higher in the extended trading session on Thursday after the company reported its 3rd quarter results. The company beat earnings and revenue estimates and also raised its full-year guidance.

Intuit’s 3rd quarter Non-GAAP EPS were $5.55, 16 cents ahead of Wall Street estimates, while revenue came in at $3.27 billion, $40 million ahead of forecasts.

The company also increased its guidance for the 4th quarter and full year. For the 4th quarter, it now expects revenue to grow 10 to 12% and a non-GAAP loss per share of 14 to 16 cents. Its full-year guidance was also well ahead of estimates. Revenue is expected to be close to $ 6.75 billion and non-GAAP EPS will be between $6.67 and $6.69, both representing growth of 12%.

 

Service Members Overcharged for Using TurboTax

The company has recently been hit by revelations that it had tricked military service members into paying a fee to file their taxes. Under a deal with the government, the company was supposed to allow service members a free filing service if they earned less than $66,000 or less. It used the deal as part of a marketing campaign and then charged the filing fee anyway.

The fees will no doubt have to be reimbursed, but it’s not clear whether or not there will be further consequences for the company. Intuit’s 2nd quarter results in February were solid and the stock price had a strong rally through March, before selling off when news of the story broke. Despite the selloff, the share price is still up 23% for the year, well ahead of the S&P500’s 13%.

 

Online Services Lead Growth

Intuit’s small business online ecosystem saw revenues grow 38%. Transitioning clients to its online services have been a priority for the company and this represents solid progress. The company also managed to increase the market share of TurboTax in the DIY category.

Small Business and Self-Employed Group revenues also showed robust growth of 19%, while consumer group revenue grew 10%.

In addition, Intuit announced that it had bought back $135 billion of its own shares during the quarter, leaving it authorized to spend another $2.8 billion buying back stock. A quarterly dividend of $0.47 per share was announced – a 21% increase compared to a year earlier.

 

Limited Downside, But Also Fully Valued

The stock is trading at 42 times its projected earnings per share for the full year. That isn’t cheap for a company growing at around 12% a year.

Software makers have been one of the bright spots in the tech sector which has had a very mixed earnings season. Software companies with recurring revenue streams are very much in demand, and any weakness in the share price will be seen as a buying opportunity. The continuing buyback will also support the share if there is any weakness.

However, the stock is trading at 42 times its projected earnings per share for the full year. That isn’t cheap for a company growing at around 12% a year.

Intuit is likely to consolidate around the current levels and may present trading opportunities. Further fallout from the TurboTax scandal may, however, create a longer-term buying opportunity.