PTC Inc (PTC, Financial) has recently experienced a daily loss of -1.08%, yet it boasts a 3-month gain of 9.03%. With an Earnings Per Share (EPS) of $2.05, investors are keen to understand: is PTC fairly valued? This article delves into a detailed valuation analysis to address this query and guide investors through the financial nuances of PTC Inc (PTC).
Company Introduction
PTC Inc (PTC, Financial) is a renowned provider of high-end computer-assisted design (Creo) and product lifecycle management (Windchill) software, in addition to offering cutting-edge Internet of Things and AR industrial solutions. Since its inception in 1985, PTC has amassed a customer base of 28,000, primarily drawing revenue from North America (45%) and Europe (40%). With a market cap of $18.40 billion and sales of $2.10 billion, PTC's financial performance is a key interest to investors, especially when comparing the stock price of $154.35 to the GF Value of $142.69—an estimate of the stock's fair value.
Summarize GF Value
The GF Value is a proprietary metric that determines the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance forecasts. This value serves as a benchmark for the stock's ideal trading range. When PTC (PTC, Financial)'s stock price significantly surpasses the GF Value Line, it suggests overvaluation and potentially poorer future returns. Conversely, a price well below the GF Value Line may indicate undervaluation and the prospect of higher future returns. Currently, PTC's stock is regarded as fairly valued, suggesting that long-term returns could align closely with the company's business growth rate.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Before investing, evaluating a company's financial strength is crucial to minimize the risk of permanent loss. PTC's cash-to-debt ratio of 0.15, though lower than 88.55% of its peers in the Software industry, suggests fair financial health with a score of 5 out of 10. This balance between debt and cash is vital for assessing the company's financial resilience.
Profitability and Growth
Consistent profitability over time signifies a lower risk for investors. PTC has maintained profitability for 8 of the past 10 years, with a notable operating margin of 21.84%, outperforming 89.75% of companies in the Software industry. This strong profitability, coupled with a revenue of $2.10 billion and an EPS of $2.05, positions PTC favorably in the market.
Growth is a pivotal valuation factor, as it often correlates with a company's long-term stock performance. PTC's 3-year average revenue growth rate surpasses 58.7% of its industry counterparts, while its EBITDA growth rate of 20.9% ranks better than 68.45% of companies in the Software industry, indicating robust growth.
ROIC vs WACC
An insightful way to gauge profitability is by comparing a company's Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). PTC's ROIC of 6.02% against a WACC of 10.73% suggests that it may not be generating sufficient cash flow relative to the capital invested. This comparison is crucial for investors seeking companies that create value for shareholders.
Conclusion
Overall, PTC (PTC, Financial) appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. It stands out in terms of growth, ranking above 68.45% of its competitors in the Software industry. For those interested in a deeper analysis, PTC's 30-Year Financials provide extensive insights.
Discover High-Quality Investments
To explore high-quality companies that may deliver above-average returns, consider the GuruFocus High Quality Low Capex Screener.
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.
