Ansys: Q2 Rebound, But Single-Digit EPS Growth And 52x P/E (Preview)

Company Update (ANSS US) (Neutral)

Summary

• We believe future investor returns in Ansys are limited by its likely less-than-10% EPS growth and high current valuation.

• Q2 results showed a strong rebound in contract value, but against a weak prior year; margin and share count headwinds remain visible.

• 2021 outlook indicates EBIT growth of just 1.0-6.3% and EPS growth of just 2.3-6.8%, even excluding share-based compensation costs.

• Ansys shares currently trade at 56.5x 2020 EPS; its P/E still exceeds 52x if based on the high end of its 2021 EPS guidance.

• With shares at $373.47, we expect a de-rating to 40x P/E or less to offset most of EPS growth up to 2024, leaving little investor gains. Avoid.

Introduction

We review Ansys, Inc. as a potential investment after Q2 2021 results were released on Thursday (August 5).

We downgraded our rating on Ansys stock from Buy to Neutral in May 2020, after an approx. 50% gain in 15 months. (We were originally buyers of ANSS stock from February 2019.) Since our downgrade, Ansys shares have risen …