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Autodesk: Designing Strong Growth | Nasdaq

I am bullish on Autodesk Inc. (ADSK), as its strong growth outlook, support from Wall Street analysts, and high upside potential relative to its consensus price target indicate that it could be a good time to add shares.

Autodesk Inc. is an American multinational software company focusing on software products and services for various industries.


Autodesk functions across the world, with offices in a number of U.S. states as well as Canada. Its flagship product is AutoCAD, but the company also offers a range of software for different industries, including engineering, architecture, education, media and others. They also offer software for consumers.

The Revit software is for building models that allow users to explore the construction and management of buildings before they are built. The media and entertainment division has animation software tools, such as Maya and 3ds Max, which are used frequently in visual and game development.

Recent Results

For the third quarter of the year 2021 (FY 2022), total revenue for the company stood at $1.1 billion, showing growth of 18% since the same period last year. GAAP operating margin went down to 17%, whereas non-GAAP operating margin went up to 32%. Diluted EPS was valued at $0.61, showing an increase since the previous year’s $0.59.

Total Design revenue was valued at $994 million, showing an increase of 17%. Make revenue was $94 million of total revenues, while Subscription Plan revenue was totaled at $1.07 billion, making up a significant portion of total revenues.

For the fourth quarter 2021, the company projects total revenue to fall between $1,185 and $1,200 million, with earnings per share falling between $0.71 and $0.77. This is after taking into consideration the current economic environment, as well as the foreign exchange currency rate environment.

For the full fiscal year, the company projects billings to fall between $4.7 and $4.8 billion, showing an increase of about 14-16%. This is not considering the impact of foreign exchange rates.

EPS for the year is projected to be $2.54 to $2.60, while free cash flow is expected to be $1,420 to $1,460 million.

Valuation Metrics

ADSK stock looks attractive here, as its enterprise value to EBITDA ratio is only 34.22x compared to its 3-year average of 38.60x. Moreover, its price to normalized earnings ratio looks quite reasonable at 43.87x, compared to its 3-year average of 51.98x.

Furthermore, the company expects fiscal 2022 revenue to grow by 15.2% and then fiscal 2023 revenue to grow by 17.6%. EBITDA will see even more dramatic growth, with expectations that it will rise by 27.3% in fiscal 2022 and 36.4% in fiscal 2023. Net normalized income is set to soar by 24% in fiscal 2022 and follow that with 36.4% growth in fiscal 2023.

Wall Street’s Take

From Wall Street analysts, ADSK earns a Strong Buy analyst consensus based on 13 Buy ratings, 2 Hold ratings, and 1 Sell rating in the past 3 months. Additionally, the average ADSK price target of $340.00 puts the upside potential at 21%.

Summary and Conclusions

Autodesk is a leading software company in its niche, and has experienced strong growth momentum of late. Moving forward, the company appears poised to continue growing at a solid clip, with its highly scalable business model leading to expanding margins as revenue continues to grow.

On top of that, valuation multiples look very reasonable, if not attractive, compared to historical averages, and Wall Street analysts are overwhelmingly bullish on the stock. In fact, the consensus price target indicates that shares could see significant upside over the next year. As a result, it might be worthwhile for investors to consider buying shares here.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

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