Autodesk Inc (ADSK, Financial) has recently experienced a daily loss of 6.9%, yet it maintains a 3-month gain of 1.04%. With an Earnings Per Share (EPS) of 4.04, the question arises: is the stock modestly undervalued? This article aims to delve into the valuation analysis of Autodesk (ADSK), providing readers with a comprehensive understanding of its current market position and potential for future growth.
Company Introduction
Founded in 1982, Autodesk is a leading application software company, catering to a diverse range of industries such as architecture, engineering, construction, product design, manufacturing, and media and entertainment. Autodesk's software solutions are pivotal for design, modeling, and rendering, with over 4 million paid subscribers worldwide. A critical aspect of this analysis is the comparison between Autodesk's current stock price of $202.66 and its GF Value of $269.63, which suggests a modest undervaluation. This intrinsic value estimate sets the stage for an in-depth assessment of Autodesk's financial health and market potential.
Summarize GF Value
The GF Value is a proprietary metric that represents the intrinsic value of a stock. It is computed using historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. When a stock's price significantly deviates from the GF Value Line, it indicates potential overvaluation or undervaluation, which can impact future returns. Autodesk's current market cap of $43.30 billion, coupled with its share price, suggests that the stock may be modestly undervalued, potentially offering higher long-term returns than its business growth alone would indicate.
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Financial Strength
Assessing a company's financial strength is crucial to minimize the risk of permanent capital loss. Autodesk's cash-to-debt ratio of 0.78 ranks below 68.87% of companies in the Software industry, indicating a need for caution. The overall financial strength of Autodesk is rated as fair, with a score of 6 out of 10, suggesting a stable but not exceptional financial position.
Profitability and Growth
Consistent profitability over time signifies a lower risk investment. Autodesk has maintained profitability for 6 out of the past 10 years, showcasing strong profit margins. With a revenue of $5.20 billion and an EPS of $4.04, Autodesk's operating margin stands at 19.42%, outperforming 87.59% of its peers in the Software industry. This level of profitability, ranked 7 out of 10, conveys a solid financial standing.
Growth is a pivotal factor in valuation. Autodesk's 3-year average annual revenue growth rate of 16% surpasses 67.18% of companies in the Software industry, while its EBITDA growth rate of 35.7% is higher than 82.12% of its competitors, indicating robust growth prospects.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) reveals its efficiency in generating cash flow relative to its capital investments. Autodesk's ROIC of 9.26 is currently lower than its WACC of 13.09, suggesting that the company needs to improve its capital efficiency to create more value for shareholders.
Conclusion
In summary, Autodesk (ADSK, Financial) appears to be modestly undervalued. Its financial condition is fair, and its profitability is commendable. The company's growth outperforms a significant portion of its industry peers. For a more detailed financial overview, interested investors can review Autodesk's 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.
