Ansys: Double-Digit Topline Growth, But Still Too Expensive

(Preview) Company Update (ANSS US) (Neutral)

Summary

• ANSYS shares are 41% below the peak last year, but still too expensive and will generate only a 7% annualized return, in our view.

• Relative to 2022 guidance, ANSYS has a P/E of 32x on Non-GAAP EPS and one of 48x on GAAP EPS; Free Cash Flow Yield is 1.9%.

• Operational performance has been strong, with mid-teens revenue growth and rising EBIT margin in Q1-3, but Q4 will be key.

• ANSYS financials will likely be resilient even in the event of a recession; revenues grew by 11% in 2020, despite COVID disruption.

• With shares at $244.88, we continue to wait for a better entry point or evidence that the current P/E is sustainable. Avoid for now.

Introduction

We review our Hold rating on ANSYS, Inc., a U.S. simulation software company with a market capitalization of $21.4bn. ANSYS stock is at roughly the same level as it was at our last update in September, and 41% below the peak it reached last December.

We downgraded our rating on ANSYS from Buy to Hold in May 2020, when the share price was $26…