At the initial phase of an analysis, Autodesk appears suitable for the Enterprising Investor but not the Defensive Investor due to the lack of earnings growth over the last ten years, the lack of dividend payments, and the high PEmg and PB ratios. The Enterprising Investor’s only initial concern is the lack of dividend payments. Defensive Investors should look to other opportunities while Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
The company has shown some growth in raising its EPSmg (normalized earnings) from $0.80 in 2011 to an estimated $1.07 for 2015. However, the market is implying an earnings growth rate of 23.25% for the next 7-10 years. In contrast, the average growth rate the company has achieved over the last few years is only 6.77%. There would have to be a significant change in the company’s prospects in order to meet the market’s implied forecast, especially for such a long period of time. As a result, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.
Be sure to check out previous ModernGraham valuations of Autodesk Inc. for more perspective!
Disclaimer: Â The author did not hold a positionÂ in Autodesk Inc. (ADSK)Â orÂ 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. Â Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.