With very high implied volatility (967.1%) in Autodesk, Inc.’s (ADSK) Apr 2023 $135 call indicating that options traders are pricing in a big move, we take a closer look at the stock’s fundamentals.
ADSK is a three-dimensional (3D) design, engineering, and entertainment software and services provider. The company’s offerings cater to four primary product families: architecture, engineering, and construction (AEC); AutoCAD and AutoCAD LT; manufacturing (MFG); and media and entertainment (M&E).
The stock has dipped 2.1% over the past month to close the last trading session at $196.56.
Let’s discuss what makes it worthy of investment.
Healthy Track Record
Over the past three years, ADSK’s revenue increased at a 15.2% CAGR, while its EBITDA has grown at a 33% CAGR over the same time horizon.
Moreover, ADSK’s net income and total assets have increased at 56.6% and 15.2% CAGRs, respectively, over the past three years.
Robust Financials
During the fourth quarter of the fiscal year that ended January 31, 2023, ADSK’s total net revenue and gross profit increased by 8.8% and 8.6% year-over-year to $1.32 billion and $1.19 billion, respectively. During the same period, the company’s non-GAAP income from operations and net income increased by 13.8% and 229.2% year-over-year to $479 million and $293 million, respectively.
As a result, ADSK’s non-GAAP net income per share for the quarter increased by 24% year-over-year to $1.86.
For the fiscal year ended January 31, 2023, ADSK’s total net revenue and gross profit increased 14% year-over-year to $5.01 billion and $4.53 billion, respectively. During the same period, the company’s non-GAAP income from operations and net income increased 27.8% and 65.6% year-over-year to $1.79 billion and $823 million, respectively.
As a result, ADSK’s non-GAAP net income per share increased 30.8% year-over-year to $6.63.
ADSK’s total assets stood at $9.44 billion as of January 31, 2023, compared to $8.61 billion as of January 31, 2022.
Impressive Profitability
ADSK’s trailing 12-month gross profit margin of 91.57% is 81.2% higher than the industry average of 50.54%.
Similarly, the company’s trailing-12-month EBITDA and net income margins of 21.86% and 16.44% are 134.9% and 511.3% above the respective industry averages of 9.30% and 2.69%.
Moreover, ADSK’s trailing-12-month ROCE, ROTC, and ROTA of 82.55%, 16.61%, and 8.72% compare favorably to the respective industry averages of 1.96%, 1.97%, and 0.66%
Optimistic Outlook
In line with the company’s guidance, analysts expect ADSK’s revenue and EPS for the fiscal year ending January 31, 2023, to increase 8.2% and 9.1% year-over-year to $5.42 billion and $7.23, respectively.
Both revenue and EPS are expected to keep growing over the next two fiscals to reach $6.72 billion and $9.56, respectively.
Moreover, ADSK has surpassed consensus EPS estimates in three of the trailing four quarters.
POWR Ratings Reflect Investment Worthiness
ADSK’s robustness is reflected in its overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. ADSK has an A grade for Quality, consistent with its impressive profitability, and B for Growth and Sentiment, in sync with optimistic analyst estimates.
ADSK is ranked #7 of 134 stocks in the Software - Application industry. Beyond what has been discussed above, additional ratings for Value, Stability, and Momentum of ADSK can be found here.
Bottom Line
ADSK closed its largest deal to date during the previous quarter while cutting about 250 jobs or less than 2% of its global workforce to align resources better to pursue key priorities in the fiscal year 2024.
With robust fundamentals and future-focused yet fiscally disciplined management, investing in ADSK could help investors capitalize on the major upside potential in this stock.
How Does Autodesk, Inc. (ADSK) Stack up Against Its Peers?
While ADSK has an overall POWR Rating of B, which equates to a Buy, investors could also consider looking at its A-rated (Strong Buy) peers from Software - Application industry: Commvault Systems, Inc. (CVLT), eGain Corporation (EGAN) and IBEX Ltd. (IBEX).
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
ADSK shares were trading at $195.93 per share on Thursday afternoon, down $0.63 (-0.32%). Year-to-date, ADSK has gained 4.85%, versus a 8.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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