Ansys's Valuation Continues to Justify My Love

I have long been a fan of engineering simulation software developer Ansys (ANSS), and in January I bought shares for my personal account. Thursday I was rewarded for that position when ANSYS reported earnings. In addition to beating the consensus estimate for 2007, the company raised guidance for the coming quarter and full year.

The Company currently expects the following for the quarter ending March 31, 2008:

• GAAP revenue in the range of $103 - $106 million
• GAAP diluted earnings per share of $0.24 - $0.26
• Non-GAAP diluted earnings per share of $0.33 - $0.34

Fiscal Year 2008 Guidance

The Company currently expects the following for the fiscal year ending December 31, 2008:

• GAAP revenue in the range of $442 - $447 million
• GAAP diluted earnings per share of $1.12 - $1.19
• Non-GAAP diluted earnings per share of $1.48 - $1.51

These are better than the prior consensus estimates of $435 million in sales and $1.37 in earnings per share for the full year, and also above my own estimate of $1.06 in GAAP EPS. (I always maintain that if GAAP stands for Generally Accepted Accounting Principles, then non-GAAP must stand for unacceptable accounting.)

My prior analysis had indicated a fair value of $46 per share. With no other changes than the updates to existing estimates for 2008, the value rises to $48. Given the decline in interest rates since then, a much higher value could be justified. Since the $48 is still well above the current valuation, I see no need to make such justifications for continuing to hold.

Disclosure: Long ANSS

Comments

[User 161565:]

Hi, thanks for the articles. How did you arrive at a fair price for ANSY, how do we go about valuing a company before we purchase shares of the stock? Thanks!

2008 Mar 07 01:34 PM