Software Stocks

Ansys Inc Valuation – January 2019 $ANSS

Company Profile (excerpt from Reuters): ANSYS, Inc. (ANSYS), incorporated on January 12, 1994, develops and markets engineering simulation software and services used by engineers, designers, researchers and students across a range of industries and academia, including aerospace and defense, automotive, industrial equipment, electronics, biomedical, energy, materials and chemical processing, and semiconductors. The Company focuses on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, providing a common platform for product development, from design concept to final-stage testing and validation. The Company distributes its ANSYS suite of simulation technologies through a network of independent resellers and distributors (collectively, channel partners) and direct sales offices in various locations. The Company’s product portfolio consists of Simulation Platform: ANSYS Workbench, Structures, Fluids, Electronics, Semiconductors, Multiphysics, AIM, Embedded Software, Systems, Three Dimensional (3-D) Direct Modeling and Academic.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ANSS – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise $12,930,910,000 2. Sufficiently Strong Financial Condition 2.71 3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 117.84% 6. Moderate PEmg Ratio PEmg < 20 44.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.22 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition 2.71 2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend 5. Earnings Growth EPSmg greater than 5 years ago Stage 2: Determination of Intrinsic Value

EPSmg $3.45
MG Growth Estimate 6.75%
MG Value $75.90
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $50.03
MG Value based on 0% Growth $29.33
Market Implied Growth Rate 18.17%
Current Price $154.75
% of Intrinsic Value 203.89%

ANSYS, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.38 in 2014 to an estimated $3.45 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into ANSYS, Inc. revealed the company was trading above its Graham Number of $52.14. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 44.85, which was below the industry average of 50.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $7.21.

ANSYS, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $7.21
Graham Number $52.14
PEmg 44.85
Current Ratio 2.71
PB Ratio 5.22
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,127,567,000
Total Current Liabilities $415,439,000
Long-Term Debt $0
Total Assets $3,056,111,000
Intangible Assets $1,795,131,000
Total Liabilities $507,565,000
Shares Outstanding (Diluted Average) 86,043,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.53
Dec2017 $2.98
Dec2016 $2.99
Dec2015 $2.76
Dec2014 $2.70
Dec2013 $2.58
Dec2012 $2.14
Dec2011 $1.91
Dec2010 $1.64
Dec2009 $1.27
Dec2008 $1.29
Dec2007 $1.02
Dec2006 $0.19
Dec2005 $0.65
Dec2004 $0.53
Dec2003 $0.34
Dec2002 $0.31
Dec2001 $0.22
Dec2000 $0.25
Dec1999 $0.22
Dec1998 $0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.45
Dec2017 $2.87
Dec2016 $2.76
Dec2015 $2.57
Dec2014 $2.38
Dec2013 $2.12
Dec2012 $1.81
Dec2011 $1.57
Dec2010 $1.29
Dec2009 $1.04
Dec2008 $0.86
Dec2007 $0.61
Dec2006 $0.41
Dec2005 $0.48
Dec2004 $0.37
Dec2003 $0.29
Dec2002 $0.25

Recommended Reading:

Other ModernGraham posts about the company

Ansys Inc Valuation – March 2018 $ANSS
Ansys Inc Valuation – June 2016 $ANSS
Ansys Inc. Valuation – November 2015 Update $ANSS
The Best Companies of the Software Industry – August 2015
Ansys Inc. Analysis – Initial Coverage $ANSS

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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