Ansys (ANSS, Financial) recently announced a 10% increase in non-GAAP third quarter 2014 revenue to $235.5 million from $213.4 million in the same period last year. However, analysts had expected $236.4 million, according to Zacks. The company has also provided fourth quarter 2014 non-GAAP revenue guidance in $245.0 million to $253.0 million range.
In addition, Ansys reported 6% increase in third quarter 2014 non-GAAP net income to $83.7 million from $78.8 million during third quarter 2013. Non-GAAP earnings for third quarter 2014 also increased 7% to $0.89 from $0.83 in third quarter 2013. Ansys expects fourth quarter 2014 non-GAAP diluted earnings per share in $0.78 to $0.82 range. Now the question is, can Ansys improve further going forward? Let's find out.
Reporting strong growth
Ansys revenue growth in double-digits was primarily propelled by highly extensive growth across its key product lines coupled with notable growth in several other industry sectors such as energy, automotive, defence, aerospace, semiconductor and electronics.
Ansys witnessed solid growth in the bookings for third quarter 2014. Its average deal size in total transactions noted at $1 million expanded greater than 50% compared to the similar deals signed during the same period in 2013.
Ansys while executing successfully on its commitment for delivering superior stockholder returns, repurchased more than 460,000 shares in the quarter with 1.4 to more than 1.4 million shares for year-till-date.
Looking at the company's solid liquidity position, improved growth pipeline and a promising future, the management expanded the share repurchase authorization to 5 million shares for this week, and is expected to be highly aggressive in its repurchase program for the coming two quarters.
The growth and subjective pipelines of Ansys have expanded significantly with a continuous rise in the recurring revenues. Moreover, there’s a continued trend shift for purchasing preferences that converges well with the company’s long term growth.
The company’s lease business grew higher than its paid-up business. Also, there’s a shift in purchasing preferences among several established customers earlier leveraging perpetual licenses. Hence, they have initiated the shifting of engagement discussions to multiyear, time-based licenses, mainly with their expansion for multiphysics usage base. This is also viewed in the continued bookings growth, increasing over 20% in the quarter.
Ansys made some considerable modifications in its entire Asia-Pacific leadership team last year including China, Taiwan, India and Japan. These investments are now paying off in the form of excellent revenue growth for initial nine months for entire Asia-Pacific, GIA and Japan.
A look at the key metrics
The trailing P/E and forward P/E ratios of 29.25 and 21.98, respectively, indicate the cost-cutting moves of the company, coupled with an improvement in its operations. In addition, it is better than the industry’s average of 33.33. The PEG ratio of 2.30, above 1, represents slower growth as compared to the healthier industry’s average of 1.07. The profit margin of 28.44% is good. The revenue per share and diluted EPS of 9.94 and 2.72, respectively, represent impressive shareholder earnings.
The current ratio of 2.64 signifies robustness of the company’s balance sheet. Finally, investors are expected to invest in Ansys considering its solid long-term growth prospects as indicated by a CAGR for the next 5 years per annum of 10.40%, comparable to the industry’s average of 20.32%, and expect strong returns in the long run.
