Autodesk Inc (ADSK, Financial) has recently experienced a daily loss of 7.99%, and over the past three months, the stock has seen a decline of 10.91%. Despite these market fluctuations, the company boasts an Earnings Per Share (EPS) of 4.21. Investors are keen to understand if this signifies that the stock is modestly undervalued. Through the following valuation analysis, we aim to provide insights into Autodesk's current market position and intrinsic value.
Company Introduction
Founded in 1982, Autodesk Inc (ADSK, Financial) is a pioneering application software company that caters to a wide variety of industries, including architecture, engineering, construction, product design, manufacturing, and media and entertainment. With a robust suite of software solutions, Autodesk enables design, modeling, and rendering needs across these sectors. The company has established a strong global presence with over 4 million paid subscribers in 180 countries. Currently, Autodesk's stock is trading at $210, with a market capitalization of $44.90 billion. This valuation prompts a comparison to the GF Value of $258.89, estimated as the fair value of the stock, to determine the potential investment opportunity.
Summarize GF Value
The GF Value is a unique valuation metric that calculates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance estimates. If a stock's price significantly exceeds the GF Value Line, it may be considered overvalued, potentially leading to poor future returns. Conversely, a price well below the GF Value Line could indicate an undervalued stock, suggesting higher future returns. Autodesk (ADSK, Financial), with its current price of $210 per share and a market cap of $44.90 billion, is perceived to be modestly undervalued according to the GF Value estimation.
Given this undervaluation, there is a likelihood of higher long-term returns for Autodesk's stock compared to its business growth trajectory.
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Financial Strength
Investors must consider a company's financial strength to avoid permanent capital loss. Autodesk's cash-to-debt ratio of 0.86 places it below 67.1% of its peers in the Software industry. Despite this, GuruFocus awards Autodesk a financial strength rating of 7 out of 10, reflecting a reasonably healthy balance sheet.
Profitability and Growth
Profitability is a critical indicator of a company's risk profile, and Autodesk has maintained profitability for 6 out of the past 10 years. With annual revenues of $5.50 billion and an EPS of 4.21, Autodesk's operating margin surpasses that of 89.63% of its competitors in the Software industry. This level of profitability, as ranked by GuruFocus, is considered fair.
Growth is an essential factor in a company's valuation, as it is closely linked to long-term stock performance. Autodesk's 3-year average annual revenue growth rate of 14.2% outperforms 63.04% of the companies in the Software industry. The 3-year average EBITDA growth rate of 21.7% also ranks favorably, exceeding 68.66% of the companies in the same sector.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Autodesk's ROIC of 9.08 is currently lower than its WACC of 13.01, suggesting that it is not creating value for shareholders over the past year.
Conclusion
In summary, Autodesk (ADSK, Financial) appears to be modestly undervalued. The company's financial condition and profitability are fair, and its growth is commendable when compared to industry peers. For a deeper understanding of Autodesk's financials, interested investors can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
