Ansys Inc (ANSS, Financial) recently showcased a notable daily gain of 18.08% and a three-month gain of 18.18%, accompanied by an Earnings Per Share (EPS) of $5.54. Investors are keenly observing these figures, questioning whether Ansys (ANSS) is fairly valued in the current market. This article delves into a detailed valuation analysis to address this question and provide insights into the intrinsic value of Ansys (ANSS).
The valuation of Ansys Inc (ANSS, Financial) is a critical aspect for investors seeking long-term growth. As we explore the company's financials and market position, readers are encouraged to consider the following analysis to gain a comprehensive understanding of Ansys's true market value.
Company Overview
Ansys Inc (ANSS, Financial) is a pioneering engineering software company that delivers advanced simulation capabilities across various domains, including structural, fluids, and electromagnetic properties, among others. With a workforce exceeding 4,000 and a customer base of over 50,000 worldwide, Ansys serves pivotal industries such as aerospace, defense, and automotive. The company's stock is currently trading at $357.98 per share, with a market capitalization of $31.10 billion, which prompts an evaluation against the GF Value of $350.27 to determine if the stock is trading at a fair valuation.
Understanding the GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, as well as future business performance projections. It serves as a benchmark for what the stock's fair trading value should be. When a stock's price significantly exceeds the GF Value Line, it may be considered overvalued, which could lead to disappointing future returns. Conversely, a price below the GF Value Line suggests undervaluation and potentially higher future returns.
Ansys (ANSS, Financial) currently exhibits signs of being fairly valued. This assessment is based on historical trading multiples, past business growth, and analyst estimates of future business performance. Given its present price of $357.98 per share and a market cap of $31.10 billion, the stock appears to align closely with the GF Value Line, indicating a fair valuation.
As a result of being fairly valued, the anticipated long-term return of Ansys stock is likely to mirror the rate of its business growth.
Financial Strength of Ansys
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Ansys's financial strength can be assessed by examining metrics such as its cash-to-debt ratio, which is currently 0.75. This ratio positions Ansys in a less favorable light compared to 68.63% of its peers in the Software industry. Despite this, GuruFocus awards Ansys a financial strength rating of 8 out of 10, signifying a strong balance sheet.
Profitability and Growth Prospects
A profitable company, especially with a track record of consistent profitability, is typically a safer investment. Ansys has maintained profitability for the past decade, with a revenue of $2.20 billion and an Earnings Per Share (EPS) of $5.54 over the last twelve months. Its impressive operating margin of 25.63% outperforms 93.36% of competitors in the Software industry, earning a GuruFocus profitability rank of 10 out of 10.
Growth is a vital valuation factor, as it is closely correlated with long-term stock performance. Ansys's average annual revenue growth rate is 10.2%, ranking favorably against 54.9% of companies in the Software industry. However, its 3-year average EBITDA growth rate of 6.1% falls behind 56.21% of industry counterparts.
ROIC vs WACC Analysis
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to the capital invested. Ansys's ROIC over the past 12 months is 9.03%, which is less than its WACC of 10.87%, indicating that the company may not be generating sufficient cash flow relative to its capital costs.
Conclusion
In conclusion, Ansys (ANSS, Financial) appears to be fairly valued when considering its financial condition, profitability, and comparison to industry growth rates. While its growth ranks below some industry counterparts, the company's strong financials and profitability suggest a stable investment. For a deeper dive into Ansys's financials, interested investors can explore the company'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.
