Is PTC Inc (PTC) Stock Fairly Valued?
PTC Inc (NASDAQ:PTC) has experienced a daily gain of 1.56%, with a 3-month gain of 8.56%. It boasts an Earnings Per Share (EPS) of 2.57. But is the stock fairly valued? This article provides an in-depth valuation analysis to answer this critical question. Let's dive in.
An Overview of PTC Inc (NASDAQ:PTC)
Founded in 1985, PTC offers high-end computer-assisted design (Creo) and product lifecycle management (Windchill) software, as well as Internet of Things and AR industrial solutions. With 28,000 customers, the company's revenue primarily stems from North America (45%) and Europe (40%). The stock is currently priced at $142.43 per share, with a market cap of $16.90 billion. However, is this price justified by its intrinsic value? The following analysis aims to answer this question.
Understanding the GF Value
The GF Value is a proprietary estimation of a stock's fair value, calculated using historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's ideal fair trading value. A stock price significantly above the GF Value Line indicates overvaluation and potential poor future return. Conversely, a price significantly below suggests undervaluation and potentially higher future return.
According to GuruFocus Value calculation, PTC (NASDAQ:PTC) is fairly valued. This conclusion is based on historical trading multiples, past business growth, and analyst estimates of future business performance. As a result, the long-term return of PTC stock is likely to align with the rate of its business growth.
Financial Strength of PTC
Investing in companies with low financial strength could lead to permanent capital loss. Therefore, it's crucial to examine a company's financial strength before investing. PTC has a cash-to-debt ratio of 0.15, ranking worse than 89.25% of 2706 companies in the Software industry. Based on this, GuruFocus ranks PTC's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth of PTC
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. PTC has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $2.10 billion and an Earnings Per Share (EPS) of $2.57. Its operating margin is 23.18%, ranking better than 91.34% of 2725 companies in the Software industry. Overall, the profitability of PTC is ranked 8 out of 10, indicating strong profitability.
Growth is one of the most important factors in the valuation of a company. PTC's average annual revenue growth is15.3%, ranking better than 66.05% of 2392 companies in the Software industry. The 3-year average EBITDA growth is 59.3%, ranking better than 91.62% of 1994 companies in the Software industry.
ROIC vs WACC
The comparison of Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to assess a company's profitability. For the past 12 months, PTC's return on invested capital is 7.42, and its cost of capital is 10.53.
Conclusion
In conclusion, PTC (NASDAQ:PTC) stock is believed to be fairly valued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 91.62% of 1994 companies in the Software industry. To learn more about PTC stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
