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Reasons to Retain ANSYS (ANSS) Stock in Your Portfolio

ANSYS ANSS is benefiting from higher demand for its simulation products across verticals like high tech, semiconductor and aerospace & defense.

The company’s 2022 and 2023 revenues are anticipated to rise 5.3% and 10.3%, year over year respectively. The company’s earnings are expected to increase 5.2% and 10.9% on a year-over-year basis in 2022 and 2023, respectively.

ANSS outpaced estimates in all the trailing four quarters, delivering an earnings surprise of 13.2%, on average. The long-term EPS growth rate stands at 7.9%.

In the last reported quarter, ANSS reported non-GAAP earnings of $1.77 per share, beating the Zacks Consensus Estimate by 9.9%. Non-GAAP revenues of $475.9 million surpassed the Zacks Consensus Estimate by 2%. The top line increased 5% (up 12% at constant currency) from the year-ago quarter.

For third-quarter 2022, ANSYS expects non-GAAP earnings in the range of $1.56-$1.70 per share. Non-GAAP revenues are anticipated to be between $455 million and $475 million. Management projects a non-GAAP operating margin of 37.8-39.4%. For 2022, ANSYS expects non-GAAP revenues of $2.005-$2.055 billion.

The stock is down 44% from its 52-week high level of $413.89 reached on Nov 5, 2021, making it more affordable for investors.

Strong Fundamentals

Headquartered in Canonsburg, PA, ANSYS develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia.

The company is gaining higher adoption of ANSYS’ simulation solutions in the various verticals like aerospace & defense, high tech, ground transportation and automotive.

In the automotive sector, higher demand for electrification and advanced driver assistance systems solutions led to double-digit revenue growth across the Americas and Asia-Pacific regions in the last reported quarter.

The company is well-positioned to gain from the rapid adoption of Internet of Things in the manufacturing industry. Recent business collaborations with Intel Foundry Services and Samsung Foundry, along with frequent product launches are tailwinds. Increases in chip designing activity in the semiconductor space also bode well.

Aggressive acquisition strategy has also played a pivotal part in developing the company’s business in the last few years. Some of the recent notable acquisitions include Motor Design Limited, OnScale, Zemax and Phoenix Integration.

Despite strong demand, the company's near-term prospects might be affected owing to global macroeconomic weakness, inflation, and lingering supply chain troubles. Intensifying competition and adverse currency translations are added concerns for this Zacks Rank #3 (Hold) stock.

Stocks to Consider

Some better-ranked stocks from the broader technology space are Synopsys SNPS, Pure Storage PSTG and Arista Networks ANET. Pure Storage currently sports a Zacks Rank #1 (Strong Buy), whereas Arista Networks and Synopsys carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Synopsys’ 2022 earnings is pegged at $8.85 per share, up 4.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.2%.

Synopsys’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 3%. Shares of SNPS have gained 10.4% in the past year.

The Zacks Consensus Estimate for PSTG’s 2022 earnings is pegged at $1.18 per share, rising 24.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 35.5%.

Pure Storage’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 171.8%. Shares of PSTG have gained 14.8% in the past year.

The Zacks Consensus Estimate for Arista Network’s 2022 earnings is pegged at $4.04 per share, increasing 1.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 15.7%.

Arista Network’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.1%. Shares of ANET have risen 31.1% in the past year.


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