Recently, the market for software companies that provide various engineering simulation software and computer aided engineering (CAE) has been gaining new pace. The growth momentum seems to carry on, as analysts and researchers anticipate the global CAE market to reach $3,402.3 million by 2016 at a CAGR of 1.18% between 2012-2016.
Various engineering industries are striving to obtain a better performance with targeted costs to be achieved in a time constraint environment. This forces them to opt for various engineering simulation software for better productivity and life cycle.
Strong performance
Ansys (ANSS, Financial) is one such company that is banking on this growth by providing various engineering simulation software solutions pertaining to finite element analysis, computational fluid dynamics, electronics, electromagnetic and design optimization.
The global operations of the company have enabled it to establish its footprint in over 40 countries with the customer base increasing every quarter. In its recently declared quarterly result, it reported 33 new customers, $1 million new orders, and around four new customers that crossed $10 million billing. This further goes on to state that Ansys is focused on building strong customer relationships.
The net income growth of the company in the last quarter, from the same quarter one year ago, has exceeded that of the S&P 500 and greatly outperformed the software industry average. The net income increased 35.4% when compared to the same quarter one year prior, rising from $56.06 million to $75.93 million.
A product enhancement in tandem with customer feedback is the key for Ansys’ success with new customers and retaining old customers. It recently launched Ansys 15.0 with enhanced multi-physics capability in the existing framework of the Ansys workbench. Ansys had been working hard and allocating all resources to release this feature. This feature further increases the probability for Ansys to get more new clients in future.
The company is also safeguarding the interest of investors through share repurchase programs and is returning cash to investors. In the last quarter, it repurchased around 505,000 shares and this totals to 1.5 million shares repurchased since 2013. It further announced that the existing share repurchase program has been raised to 3 million shares.
Outlook
The company is optimistic about its first quarter results that are due next month. It also anticipates seven digit deals to materialize.
The new sales team appointed by Ansys can ramp up the top and bottom lines from the growing market of CAE (computer aided engineering) in the Asia-Pacific Region. India is one of the emerging and fastest growing economic zones and anticipates the CAE market to grow at a CAGR of 16.4% from 2014-2016.
The on demand module provided on private and public cloud setups can also be an impetus to the top and bottom line for the company.
Conclusion
From an investor’s point of view, the most favorable sign is that Ansys is a zero debt company. The company also has a quick ratio of 2.32, which depicts the ability of the company to cover short term liquidity needs.
Furthermore, strength is demonstrated in manifold areas like impressive EPS growth, convincing growth in top line, and finally a healthy balance sheet with good cash flow from operations, making it a solid investment.
