Today we have a moderately speculative idea.: take shares in software maker Ansys (NASDAQ: ANSS), in order to earn on the growth of the company's business.
Growth potential and validity: 15% behind 14 Months; 23,5% behind 2 of the year; 10% per annum during 15 years.
Why stocks can go up: because the company's business is strong and attractive.
How do we act: we take shares now by 325,22 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
Ansys makes complex product design software from prototyping to testing. What does the company's software look like, You can watch it on her YouTube channel.
According to the company's annual report, its revenue is divided into the following segments:
- Software - 46,44%. Licenses for the use of the company's software — 64% segment revenue, rest 36% — sale of the right to perpetual use of the software. Segment gross margin — 96,08% from its proceeds.
- Maintenance and technical support - 53,56%. Segment gross margin — 82,9% from its proceeds.
Revenue by country and region:
- USA - 46,2%.
- Japan - 10,89%.
- Germany - 9,56%.
- South Korea - 4,45%.
- France - 4,23%.
- Other countries from the block "Europe, Middle East and Africa" - 14%.
- Unnamed regions and countries - 10,67%.
Revenue of the company on industries of application of software:
- High tech - 31%.
- Defense and Aerospace - 19%.
- Automotive 19%.
- Industrial equipment - 8%.
- Other - 1%.
- Energy - 9%.
- Materials and Chemistry - 5%.
- Scientific research — 3%.
- Construction - 2%.
- Healthcare — 2%.
Arguments in favor of the company
Fell down. Since December, the company's shares have fallen heavily under the weight of its unsustainable high cost.: from 411 to 325,22 $. So,, we can pick stocks for a rebound.
stability and progress. Ansys is showing very good revenue and earnings growth year-on-year, and in general, the situation for her now is very good. Ansys customers from all industries invest generously in R&D and capital renewal, which creates a positive background for the Ansys business.
Also worth noting, what, being like a "promising IT business", the company is profitable and high-margin - unlike many other companies of this kind. She has a total margin of about 20% from proceeds. Think, what it will attract institutional investors to these stocks, who seem to want to make money on an incomprehensible and promising IT topic, but just like that, so that the risks of turning shares into a donut hole are minimal.
All in all, one might say, that Ansys is a promising smart money startup. Think, that many banks and investment funds will take advantage of the recent drawdown in the company's shares.
Clean accounting. More money in company accounts, than it takes to close all her debts, as urgent, so not very. It's good: Ansys shares will not scare off investors in anticipation of a rate increase and an increase in the cost of loans.
Diversification. According to the company's annual report, no customer gives her more 5% from proceeds. It's good, because it strengthens the company's negotiating position - and its ability to raise prices.
Can buy. Considering, that respected tech giants like Cisco are willing to spend $20 billion on such a money-losing venture, like splunk, I do not quite understand, why in this case cannot find a buyer for Ansys, even considering its high price. Her business is stable and very profitable - it's more, than that, what most loss-making startups can dream of, which at the same time costs almost like Ansys.
In absolute terms, Ansys is inexpensive at $28.38 billion.. The premium to the current price of the company should be significant, but in absolute numbers, buying Ansys for a large company will not be ruinous.
What can get in the way
Still not cheap. Even after the fall, the company is worth a lot of money.: P / S she has about 15,17, a P / It's about 60. So its quotes can still shock - especially if the pace of revenue growth will disappoint investors.
Competitors. The company has a number of strong competitors: Autodesk, Cadence Design Systems и AspenTech. I do not think, that they will put Ansys on the brink of bankruptcy: on the final margin of Ansys imperceptibly, so that she had to heavily dump.
But all strong competitors are a possible reason, according to which Ansys will be forced to spend a lot of money on the purchase of some swindling startup, to maintain existing competitive advantages.
The company spends a lot on acquisitions. Given the inflated cost of IT businesses, i would be afraid, that Ansys will have to increase its debt burden - or it will be engaged in an additional issue of its shares to the detriment of the interests of minority shareholders like us.
Due to the presence of competitors, it is necessary to maintain a fairly high level of salary - in the face of a lack of technical and IT specialists in the United States, I would be wary, that the labor of workers for Ansys will grow in value very quickly.
What's the bottom line?
We take shares now by 325,22 $. And then we have three options:
- wait for growth until 375 $. Think, we will reach this level in the next 14 Months;
- wait for the return of quotations to 403 $. Think, here you should prepare for two years of waiting;
- keep shares next 15 years, to see, how the company will become a new Adobe.
