Ansys Inc (ANSS, Financial) has recently experienced a daily loss of -5.85% and a 3-month loss of -19.13%. Despite these setbacks, the company maintains an Earnings Per Share (EPS) (EPS) of 6. This raises a pertinent question: Is Ansys (ANSS) significantly undervalued? This article presents a detailed valuation analysis to answer this question and provide valuable insights for potential investors.
A Snapshot of Ansys Inc (ANSS, Financial)
Ansys is a leading engineering software company that provides simulation capabilities across various domains, including structural, fluids, semiconductor power, embedded software, optical, and electromagnetic properties. The company employs over 4,000 people and serves over 50,000 customers globally in sectors like aerospace defense and automotive. With a market cap of $22.80 billion and sales amounting to $2.20 billion, Ansys is a significant player in the tech industry. The company's stock price currently stands at $262.45, which is significantly lower than its GF Value of $388.48.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. 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.
According to our calculations, Ansys (ANSS, Financial) is significantly undervalued. Given this, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength of Ansys
Before investing in a company, it's crucial to evaluate its financial strength. This involves looking at metrics like the cash-to-debt ratio and interest coverage. Ansys has a cash-to-debt ratio of 0.56, which is worse than 73.74% of 2738 companies in the Software industry. However, the overall financial strength of Ansys is 8 out of 10, indicating strong financial health.
Profitability and Growth of Ansys
Consistent profitability over the long term makes a company a less risky investment. Ansys has been profitable 10 over the past 10 years, with an operating margin of 27.93%, which ranks better than 94.29% of 2766 companies in the Software industry. This gives Ansys a profitability rank of 10 out of 10, indicating strong profitability.
However, growth is a crucial factor in a company's valuation. The average annual revenue growth of Ansys is 10.2%, which ranks better than 55.03% of 2397 companies in the Software industry. The 3-year average EBITDA growth is 6.1%, which ranks worse than 56.47% of 1994 companies in the Software industry, indicating slower growth.
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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Ansys's ROIC was 9.85, while its WACC came in at 11.7.
Conclusion
In conclusion, Ansys (ANSS, Financial) stock appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust, despite slower growth compared to other companies in the Software industry. For more details about Ansys stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
