ANSYS

We keep coming back to quality, in the last month we have looked at a number of value companies, but in each case we have failed to get comfortable with downside. ANSYS is high quality, and like everything high quality in the market, valuations makes you question your assumptions many times. In the end, we agreed that the secular change was highly probable to materialise, and having made the mistake of underestimating change a number of times before, we concluded that ANSYS was something we should own.

• We like ANSYS’ dominant position in a niche technology that has a potential to go mainstream.Highly profitable with 40%+ operating margins, high R&D spend and very low capital intensity, generating strong free cash flow.

• We expect sustainable double digit growth to continue for several years.

• Internal change: partnerships, channel expansion and increased sales people, who take 2-4 years to ramp up.

• Long term growth tailwinds of IoT, digital twins, autonomous driving, additive manufacturing, retooling of automotive industries

• Expect ANSYS to supplement organic growth with acquisitions, using its free cash flow.

Potential Upside:     $228 (+21%)

Sensible Downside: $170(-10%)

Link to Research Report