With a daily loss of -1.78%, a 3-month loss of -6.41%, and an Earnings Per Share (EPS) of 6, Ansys Inc (ANSS, Financial) appears to be modestly undervalued. This article delves into a comprehensive analysis of the company's valuation, encouraging readers to examine its intrinsic value.
Company Introduction
Ansys Inc (ANSS, Financial) is an engineering software company that provides simulation capabilities for various fields. It employs over 4,000 people and serves over 50,000 customers globally, including those in aerospace defense and automotive. With a stock price of $297.53 and a GF Value of $383.54, Ansys seems to be trading below its fair value. The following analysis provides a deeper exploration of Ansys's value.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It indicates the fair value at which the stock should be traded. Calculated based on historical multiples, GuruFocus adjustment factor, and future business performance estimates, the GF Value Line provides an overview of a stock's fair value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Currently, with a market cap of $25.80 billion and a price of $297.53 per share, Ansys (ANSS, Financial) appears to be modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to review a company's financial strength before deciding to buy its stock. Ansys has a cash-to-debt ratio of 0.56, which is worse than 74.01% of 2751 companies in the Software industry. However, GuruFocus ranks the overall financial strength of Ansys at 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Ansys has been profitable 10 over the past 10 years, with a revenue of $2.20 billion and Earnings Per Share (EPS) of $6. Its operating margin is 27.93%, which ranks better than 94.29% of 2785 companies in the Software industry. Overall, GuruFocus ranks Ansys's profitability at 10 out of 10, indicating strong profitability.
Growth is one of the most critical factors in the valuation of a company. Ansys's 3-year average revenue growth rate is better than 55.62% of 2413 companies in the Software industry. However, its 3-year average EBITDA growth rate is 6.1%, which ranks worse than 56.08% of 2006 companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. Ansys's ROIC was 9.85 over the past 12 months, while its WACC came in at 11.4. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders.
Conclusion
In conclusion, Ansys (ANSS, Financial) appears to be modestly undervalued. The company's strong financial condition and profitability indicate its potential for higher future returns. Despite its growth ranking worse than 56.08% of 2006 companies in the Software industry, the overall prospects of Ansys remain promising. For more about Ansys stock, check out its 30-Year Financials here.
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