ANSYS: Shares Continuing To Lag After Q3 Results; Still Too Expensive

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

Summary

• Ansys stock has gained only 5.1% year-to-date, significantly trailing the  double-digit returns in the S&P 500 and NASDAQ indices.

• However, we believe the stock is still too expensive, with medium-term earnings growth likely below 10% and a P/E multiple exceeding 50x.

• Strong headlines in Q3 2021 results were helped by growth in perpetual license revenues, which are non-recurring in nature.

• Full-year outlook implies a shrinking EBIT margin, 10%-at-best EPS growth, and falling Operating Cash Flows, in line with our Neutral case.

• At $382.48, Ansys stock is trading at 51.8-54.3x 2021 guided EPS, and has a Free Cash Flow Yield of just 1% - overvalued in our view. Avoid.

Introduction

We review our Neutral rating on ANSYS, Inc. , focusing on Q3 2021 results released after market close on November 3. Ansys stock gained 6.5% the day after Q3 results, but has since more than given back this gain.

Ansys shares have gained only 5.1% year-to-date, significantly trailing both the S&P 500 (up 22.3%)…