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On Thursday (22 October), the S&P 500 fell around 1.5%, but my Stocks and Shares ISA went the other way. Having trailed the index for most of the year, I’m now slightly ahead with two months to go.
One stock sums it up better than most. Roper Technologies (NASDAQ:ROP) climbed 9% after third-quarter results, on the same day Meta Platforms beat expectations and fell 7%.
Disruption fears
Roper owns a collection of specialised software businesses. The stock has been my way of expressing that the market is overestimating the threat from artificial intelligence (AI).
It’s a company that I’ve admired some time (though I’ve only bought it relatively recently). There are a few key strengths:
- It’s diversified across more than 20 separate software operations.
- Its subsidiaries focus on niches – some of which are regulated – that are harder to disrupt.
- Software products are crucial, but account for a small amount of a firm’s overall costs.
- While customer switching is possible, the costs of doing so are high.
The stock fell 45% from its 2025 high, which finally gave me my chance. But it wasn’t all about potential AI disruption – Roper had been paying high prices for businesses delivering modest growth.
Acquisitions are a constant source of risk, even for the best investors. At some point however, that risk becomes reflected in the share price.
Why the rebound?
Part of the recent recovery is the AI trade unwinding. But Roper’s doing more than just hanging on while momentum stalls elsewhere – it’s growing impressively:
| Q3 growth metric | Growth |
|---|---|
| Revenue | 8% |
| Organic revenue | 7% |
| Software organic recurring revenue | 8% |
| Adjusted EPS | 15% |
| GAAP EPS | 33% |
Share buybacks are a big part of the story. Roper has responded to a falling share count with a $2.7bn repurchasing programme which has brought down the share count 7% since December.
That however, doesn’t account for the impressive revenue growth. That’s the result of AI helping the company – agentic products are live in 17 of Roper’s 21 businesses and driving sales.
The detail investors should notice is that gross margins on these AI tools are in line with the rest of Roper’s software. So – unlike Rightmove – spending on the new products isn’t hitting profitability.
That’s helped management raise its guidance for the third time this year. Adjusted earnings per share (EPS) are now expected to be 22.35-22.40, up from 21.30-21.55 at the start of the year.
What next?
The last few months have been a huge success for Roper, but things are shifting a bit. Management also has $6bn to deploy and says acquisitions now look more attractive than buybacks.
Even after the rebound, the stock trades at an undemanding 19 times this year’s adjusted earnings. That’s well below the S&P 500 average for what I expect to be above-average growth.
The AI trade that weighed on Roper’s share price is a long way from fully resetting. Investors might think they’ve missed the move, but I don’t think buying is out of the question.
In terms of my own Stocks and Shares ISA, Roper’s now a big part of my portfolio. So I’m sitting tight, but I think the stock might well have further to climb from today’s levels and is worth further research.
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Stephen Wright owns shares in Roper Technologies.
