Autodesk Inc. Quarterly Valuation – August 2014 $ADSK

500px-Autodesk_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor with High Dividend Yields.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Autodesk (ADSK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Autodesk, Inc. (Autodesk) is a design software and services company, offering customers business solutions through technology products and services. The Company operates in four operating segments: Platform Solutions and Emerging Business (PSEB), Architecture, Engineering and Construction (AEC), Manufacturing (MFG) and Media and Entertainment (M&E). The Company serves customers in the architecture, engineering and construction; manufacturing, and digital media and entertainment industries. In January 2014, Autodesk Inc completed the acquisition of technology and the development team of In February 2014, Autodesk Inc completed the acquisition of Delcam, one of the suppliers of advanced computer-aided manufacturing (CAM) software. In June 2014, it acquired Stockholm-based Bitsquid AB.
ADSK Chart

ADSK data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $54.23
MG Value $11.47
MG Opinion Overvalued
Value Based on 3% Growth $13.25
Value Based on 0% Growth $7.77
Market Implied Growth Rate 25.42%
Net Current Asset Value (NCAV) $1.01
PEmg 59.33
Current Ratio 2.32
PB Ratio 5.40

Balance Sheet – 4/30/2014

Current Assets $2,590,300,000
Current Liabilities $1,118,700,000
Total Debt $746,600,000
Total Assets $4,648,600,000
Intangible Assets $1,352,400,000
Total Liabilities $2,359,900,000
Outstanding Shares 227,870,000

Earnings Per Share 

2015 (estimate) $0.63
2014 $1.00
2013 $1.07
2012 $1.22
2011 $0.91
2010 $0.25
2009 $0.80
2008 $1.47
2007 $1.19
2006 $1.33
2005 $0.90

Earnings Per Share – ModernGraham

2015 (estimate) $0.91
2014 $1.00
2013 $0.95
2012 $0.90
2011 $0.81
2010 $0.84


Autodesk qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the lack of sufficient earnings growth over the last ten years, lack of dividend payments, and the high PEmg and PB ratios.  Meanwhile, the Enterprising Investor’s only initial concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities through a review of ModernGraham’s valuation of Adobe Systems Inc. (ADBE).  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.81 in 2011 to only an estimated $0.91 for 2015.  This low level of demonstrated growth does not support the market’s implied estimate of 25.42% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out the previous ModernGraham valuations of Autodesk Inc. (ADSK) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Autodesk (ADSK)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Autodesk (ADSK) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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