Industries worldwide are going through a digital transformation fueled by transformative capabilities of Artificial Intelligence (AI), global connectivity, advanced analytics, automation, and advanced manufacturing technology. The transformation has aptly been named the Fourth Industrial Revolution or Industry 4.0, shaping a new era of innovation and making massive contributions to the economy itself.

Amid this transformation, PTC Inc. (PTC) stands out as a pioneer in the aforementioned fields owing to its wide range of software solutions that are fueling the engine of Industry 4.0. The company offers Computer-aided design (CAD) software solutions that digitally create 2D drawings and 3D models of real-world products before they are even manufactured, enhancing product development and R&D processes.

Moreover, PTC also offers Product lifecycle management (PLM) solutions to streamline product development by enabling geographically dispersed, multidisciplinary teams to strategically collaborate with partners and customers using trusted, up-to-date product information.

That being said, PTC’s stock climbed 1.8% over the past six months and gained 5% over the past year, closing the last trading session at $184.50.

Now, let us delve deeper into the factors that could shape PTC’s performance in the near future.

Recent Developments

On December 3, PTC announced a partnership with Microsoft Corporation (MSFT) and Volkswagen AG (VWAGY) to develop a GenAI copilot based on the PTC Codebeamer® application lifecycle management (ALM) solution. Codebeamer Copilot is aimed at supporting software development in physical products by making creation and product requirements more efficient.

The partnership is set to amplify the value of Codebeamer by embedding GenAI with Microsoft Azure AI capabilities and strengthen PTC’s position in the booming AI market.

On September 25, PTC entered into a strategic collaboration agreement with Amazon Web Services (AWS) aimed at accelerating the growth of its Onshape^® cloud-native computer-aided design (CAD) and product data management (PDM) solution.

The collaboration could enhance the company’s Onshape solution, customer adoption programs, and AI initiatives, resulting in strong user growth.

Sound Historical Growth

Over the past five years, PTC has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 12.9%, while EBITDA rose at a 29.3% CAGR. Moreover, operational income (EBIT) and total assets expanded at a CAGR of 38.2% and 19.1%, respectively.

Strong Financials

For the fiscal 2024 fourth quarter that ended September 30, PTC’s total revenue increased 14.6% year-over-year to $626.55 million. Its non-GAAP gross margin rose 18.6% from the year-ago value to $528.84 million. The company’s non-GAAP operating income grew 37.8% from the prior year’s quarter to $276.56 million.

Additionally, non-GAAP net income and non-GAAP EPS increased 29.1% and 28.3% year-over-year to $186.06 million and $1.54, respectively. As of September 30, 2024, PTC’s total assets amounted to $6.38 billion compared to $6.29 billion on September 30, 2023.

Favorable Analyst Estimates

Analysts expect PTC’s revenue for the fiscal 2025 first quarter ending December 2024 to increase marginally year-over-year to $555.51 million. Its EPS is expected to come in at $0.90 for the same period. Moreover, the company exceeded the consensus EPS estimates in each of the four trailing quarters, which is noteworthy.

For the full fiscal year ending September 2025, PTC’s revenue and EPS are expected to rise 10.9% and 16.1% from the previous year, reaching $2.55 billion and $5.90, respectively.

High Profitability

PTC’s trailing-12-month gross profit margin of 80.65% is 58.2% higher than the industry average of 50.98%. Its trailing-12-month EBITDA margin stands at 30.42%, 193.1% higher than the industry average of 10.38%.

In addition, the company boasts a trailing-12-month net income margin of 16.37%, which is 333.7% higher than the sector average of 3.78%. Also, the stock’s trailing-12-month ROCE of 12.78% outperforms the industry average of 4.36% by 192.7%.

POWR Ratings Reflects Optimism

PTC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

PTC has a B grade for Quality, supported by profitability measures that exceed industry benchmarks. Its B grade for Momentum further underscores strong technical performance, with the stock trading above its 100-day moving average of $183.83 and 200-day moving average of $181.78.

Furthermore, PTC has a B grade for Growth, which is in line with its impressive historical growth. Within the B-rated Software – Application industry, PTC is ranked #39 out of 125 stocks.

Beyond what is stated above, we have also given PTC grades for Stability, Sentiment, and Value. Get all PTC ratings here.

Bottom Line

PTC has established itself as an industry leader for more than 30 years through its software product offerings that have contributed immensely to driving digital transformation across different industries.

With its cutting-edge technological innovations, robust financials, impressive growth metrics, and sustained profitability, PTC stands out as a compelling investment opportunity. Its stable momentum further underscores why now might be the perfect time to consider adding PTC to one’s portfolio.

How Does PTC Inc. (PTC) Stack Up Against Its Peers?

Although PTC’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Software – Application industry:

Progress Software Corporation (PRGS)

IBEX Limited (IBEX)

Heartcore Enterprises, Inc. (HTCR)

To explore more A or B-rated Software – Application stocks, click here.

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PTC shares were unchanged in premarket trading Monday. Year-to-date, PTC has gained 5.45%, versus a 26.79% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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