In my first article on leading engineering simulation software provider Ansys (NASDAQ:ANSS) last September, I found the company astonishingly overvalued and suggested investors wait for a significant pull-back before possibly initiating a position (see ANSS: Simulating Its Way To An Astonishing Valuation). Since then, Ansys has issued two strong EPS reports - including a dynamite Q4 beat of $0.41/share - and the stock has pulled back from $400 to $325 due to the market rotation from growth to value. The stock is now roughly where it was when my first review was published on Seeking Alpha last September (see chart below). As a result, and while acknowledging the stock is still highly valued, I am changing my view from Bearish to Bullish and advise technology investors consider buying the dip.
Investment Rationale
Ansys is arguably the global leader in engineering simulation software - supporting disciplines from fluid-dynamics, to electromagnetics, to aerospace, and a wide range of other scientific endeavors. The company has a strong presence in engineering colleges all around the world. Those engineers graduate and enter corporations and government agencies and bring their pro-Ansys bias with them because it is a tool platform they are already familiar with and know how to use.
The company was a first-move in the space and has been in business for ~50 years. Ansys has a proven record of being a value-added simulation tool during the design phase rather than building and testing prototypes. Ansys has been updating its simulation tool-set (organically and by acquisition) to support EVs, 5G, 3D-designs, IoT and even covid-19 (see graphic below) - just to name a few emerging and growing markets. That being the case, Ansys is helping its customers innovate faster, and reduce cycle times and risks while increasing quality.
Meanwhile, the company is aggressively moving to
