Aspen Technology Stock is Up More Than 20% YTD: Will the Rally Continue?

NASDAQ: AZPN | Aspen Technology, Inc. News, Ratings, and Charts

AZPN – Aspen Technologies (AZPN) is a compelling turnaround stock. Another catalyst could be a recovery in the energy sector which makes up a significant portion of revenues. Read more to find out if AZPN is a good fit for your portfolio.

Take a look at Aspen Technology’s (AZPN) one-year chart and you will be impressed. AZPN struggled in February and March of ’20 as did most other publicly traded companies. However, AZPN bounced right back to life. Today, AZPN is trading at $157. The stock was trading around $127 a year ago.

AZPN provides software and services to oil, gas, and pharmaceutical companies. As an example, chemical processing plants rely on AZPN’s software for the modeling of a plant to predict potential failures and understand the ensuing fallout. In short, AZPN makes it easier for such “process industry” companies to work with efficiently.

Will AZPN continue to climb or is the stock set for a plateau or decline? Let’s take a look at what the future might hold for this high-flying stock.

Why AZPN is on the Rise

AZPN’s rise is partially the result of its solid earnings. The company’s second-quarter fiscal ’21 non-GAAP earnings came in at an impressive $2.04 per share, surpassing analyst estimates. AZPN reported non-GAAP earnings of a mere 68 cents in the same quarter one year ago. Furthermore, AZPN’s revenue of $233.7 million surpassed most analyst estimates by about 25%. This revenue figure is meaningful as AZPN reported revenue of $126 million in the same quarter last year.

AZPN recently renewed one of its largest contracts with a worldwide oil business, re-upping for a cool $75 million. Add in the fact that AZPN’s quarterly bookings were $274.4 million, a hike of 144% on a year over year basis, and investors have all the more reason to be bullish about the stock. The spike in renewal activity is clearly helping AZPN’s balance sheet. License revenues have also jumped an impressive 148.7% on a year over year basis, hitting $180.2 million. This is important as license revenues constitute 77.1%% of the company’s revenue.

Even AZPN’s maintenance revenues jumped 20% in the quarter, representing a 5.1% hike on a year over year basis, hitting $46.8 million. Perhaps most important is AZPN’s gross profit increase of nearly 99% on a year over year basis, hitting $219.4 million. The blockbuster quarter has calmed nervous investors who questioned whether AZPN was capable of growing at a reasonable rate. There is a significant and growing demand for AZPN’s software that facilitates the use of process industry business assets by way of digitization.

What are the Analysts Saying About AZPN?

Of the half dozen analysts to have studied AZPN, most are bullish. The stock’s average price target across the prior year indicates there is a clear upward trend of around $1.57 every two weeks. A total of eight analysts have issued recommendations. Three of these analysts recommend AZPN as a Buy, two advise holding the stock, one advises selling and one considers the stock a Strong Sell. However, two of these analysts view AZPN as a Strong Buy. The high price target for the stock is a whopping $171. AZPN currently trades around $157.

AZPN According to the POWR Ratings

AZPN has an A grade in the Quality component of the POWR Ratings. The stock has a B grade in the Growth component. You can find out more about AZPN’s POWR Ratings components by clicking here.

Of the 60 publicly traded companies in the Software – Business space, AZPN is ranked 21st. If you would like to learn more about the publicly traded companies in the Software – Business category, click here.

Is the Rally Coming to an End or Just Starting?

AZPN has a forward P/E ratio of 29, meaning it might be slightly overvalued at its current trading price. However, the digitizing industry has solid long-term growth ahead. Just as important is the fact that AZPN provides solutions for a wide variety of clients in several industries.

About 40% of AZPN’s revenue stems from energy. Around 25% of the company’s customers are in construction and engineering. The remainder spans several different sectors, making it quite clear that AZPN’s customer base is well-diversified. Scoop up AZPN today, hold it for years and you will likely be quite happy with the return on your investment.

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AZPN shares were trading at $157.24 per share on Tuesday afternoon, down $1.41 (-0.89%). Year-to-date, AZPN has gained 20.72%, versus a 4.93% rise in the benchmark S&P 500 index during the same period.


About the Author: Patrick Ryan


Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...


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