Shares of Parametric Technology (PMTC) fell 21% ahead of the long Easter weekend. The developer and marketer of 3D development software solutions lowered its second quarter outlook.
Second quarter revenue for the product-design software maker falls short of its own expectations after the company did not close a large transaction in Europe and performance of its North American business fell short of expectations. According to CEO Heppelmann, the European deal could have generated as much as $10 million in revenue for the second quarter and it may be at risk altogether. As a result of the issues the company now expects earnings per share of $0.26-$0.28 on $300 million in revenue compared to an earlier guidance range of earnings per share of $0.32-$0.36 on a $305-$320 million revenue guidance.
The software producer ended its quarter with $170 million in cash and some $200 million in debt, according to its latest quarterly filing, leaving a mere "net debt" position of $30 million. After Thursday's 21% decline, shares are valued at $2.5 billion, which values the company at 2.1 times annual revenue and 29 times annual earnings. This valuation compares to a 4.2 and 8.6 times annual revenue multiple for competitors Autodesk (ADSK) and Ansys (ANSS) respectively. Both competitors trade around 33-34 times annual earnings.
Shares of Parametric hit an all time high earlier this week, but after Thursday's setback it will take some time to recover to those levels.
With a revenue expectation of $620 million for the first half of 2012 the company is on track to exceed annual revenues of $1.25 billion in 2012 on which it should easily earn over $100 million. The company does trade at a sizable revenue and earnings discount to its competitors and a slight beat for the second quarter or good news about its European contracts could lead to a swift recovery of its shares.
Investors have been scared by this week's announcement, but the news remains largely a one-time issue. Investors with a longer time horizon could easily pick up some shares for the long run.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.