This software giant could see a huge boost from the metaverse

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Ansys (NASDAQ: ANSS) stocks could be a compelling buy in the next era of the metaverse.

In this “Beat & Raise” video, registered on December 3, Fool contributors Jason Hall and Jose Najarro discuss the company’s bright growth prospects, given its position in niches that help bridge the divide between the digital and the real world.

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Jason Hall: Jose, tell us about Ansys, what’s going on?

José Najarro: How are you doing, Jason?

Room: Glad to see you mate.

Najarro: That’s why I like doing this show because sometimes I find companies that are in the markets I like. But I never knew anything about them and one of them will be Ansys. For those who are new to this company, it is a software company that deals with real life simulation. Let’s say you are an engineer, you want to develop some form of airplane and you want to test this airplane, how it would work – based on the number of people, the average weight of the cargo, the wind speed. . It gives you a simulation of – hey, your plane will work.

Room: In the actual physics involved, it’s amazing.

José Najarro: Yes. It’s pretty awesome. Let me share my screen now for a quick look at the business. They announced profit some time ago, early Nov 3rd after the market closed. They have a market capitalization of around $ 33.4 billion. We can see one thing is that a lot of stocks are affected. Ansys doesn’t appear to be one of them at the moment. The market is doing much better than Ansys, but it is not that far behind. Third-quarter revenue was $ 445 million, and it showed about 20% growth, and they beat analysts’ expectations. It is a profitable business with earnings per share of $ 1.59. It also exceeded analysts’ expectations. They gave a fairly wide range of outlook for the fourth quarter. In the lower part, it almost would have been like a flat year. Across the top, fourth-quarter revenue would be around $ 655 million, which would estimate growth of around 4.3% year-over-year. They expect flat to very low single digit growth for the coming quarter. Like I said, very profitable company right now, operating cash flow of $ 157.8 million this quarter. Over 25% cash margins, we also found it to be profitable in terms of profit capitalization. They have strong deferred income and an order book of nearly $ 900 million in predictable revenue. This is normally the case with many of these software companies, as most of them are usually annual or longer subscriptions, so they can forecast what revenue they are expected to generate over the next couple of years. years. Some other highlights, they acquired another software company called Zemax and I think it is a private company. It’s a more optical design, so let’s say you’re building some form of laser or some form of fiber products, and you want to see how the light waves react in certain fibers, in certain glasses. It’s software that works with it, so I think it works well with all of the products that they make, they do these real physics simulations. With optics, with Zemax, it will be physical simulation, but in the optical world. I think it was also a great acquisition for them. They’re managing in the global call for results, they mentioned that one of the biggest concerns is that the global pandemic and trade restrictions are affecting the company’s revenue. As a software publisher they didn’t take it a step further, but I’m guessing right now with issues like supply chain issues engineering companies might not be developing not as many products as they would normally be, due to constraints and supplies. or products. It might affect in the short term, but overall it looks like a nice stable business, and one that I’ll likely have on my radar now from the future to see this one definitely takes a plunge, and I can learn a little more about.

Room: It’s interesting, it’s almost like you’re thinking of another company that’s very involved in computer-aided design, and that’s Autodesk (NASDAQ: ADSK). What was also just pointed out fairly recently, I think we talked about yesterday. Jose, and it’s interesting, Toby, excuse me, Travis Hoium was talking about this. By the way, Travis is as much an engineer by training as you are. Their predictions for their directions were perhaps also a little weaker. One of the things they talked about is that so many of their customers are just overwhelmed. The upgrade cycle almost prevents them from being able to necessarily perform large-scale product upgrades. I’m wondering if maybe this is something happening with some of Ansys customers as well?

Najarro: Yes. I mean, Autodesk is the one that I follow quite regularly. Many of my friends use Autodesk for my experience, I have never used it. It’s a bit more, I mean mechanical and civil engineering, but Ansys is one that after reading about it earlier today I messaged a few of my friends and they use this software and they really like it, so I’m happy to hear that.

Room: Yes, and also Autodesk. It is dominant. It’s by far the biggest player in its market and you think of things like the metaverse. You think about the growth and obviously the things they do look a lot like real world design stuff, but the apps in general, I think you’re just going to keep growing and the dominant players in those spaces usually just keep going. to win .

Najarro: I agree, I mean things like the metaverse, even though it’s a digital world form in the future, it still has to make sense. Physics must work. Exactly. A company like Ansys can certainly see a future in this.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. Jason hall has no position in any of the stocks mentioned. Jose najarro has no position in any of the stocks mentioned. The Motley Fool owns and recommends Autodesk. The Motley Fool recommends ANSYS. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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