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ANSYS (ANSS) Stock Gains 38% YTD: Will the Uptrend Continue?

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ANSYS (ANSS - Free Report) has witnessed strong momentum this year, with shares surging 38% year to date compared with the S&P 500 Composite’s gain of 14.8%. The company is a leading developer of engineering simulation software and services widely used by engineers, designers, researchers across a broad spectrum of industries and academia.

The increase in share price is driven by robust demand for its solutions across various verticals especially aerospace and defense, high-tech and automotive.

In the automotive sector, higher demand for electric vehicles and advanced driver assistance systems solutions led to double-digit revenue growth in the last reported quarter. ANSS is likely to benefit from rapid growth in the high-tech industry led by ongoing development in artificial intelligence and machine learning. Solid momentum in the aerospace and defense sector owing to government-led programs and digital transformation bodes well.

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Increased demand for high-performance computing and 5G wireless systems in the semiconductor space are added positives. ANSYS’ solutions are also witnessing healthy uptake in the healthcare segment. Strong channel distribution, go-to-market momentum and a healthy pipeline are expected to contribute to the annual contract value.

Aggressive acquisition strategy has played a pivotal part in developing the company’s business in the last few years. In May 2023, management announced the acquisition of Diakopto, a provider of Electronic Design Automation solutions for integrated circuit development. Diakopto focuses on addressing critical issues arising from layout parasitics, which have become increasingly complex in modern semiconductor designs employing advanced process node technologies.

In January 2023, ANSYS announced the acquisition of Engineering Simulation and Scientific Software’s subsidiary - Rocky DEM. Some other noteworthy acquisitions include Zemax LLC, Phoenix and Analytical Graphics.

ANSYS’ 2023 and 2024 revenues are anticipated to rise 10% and 8.8% year over year, respectively. The company’s earnings are expected to increase 7.6% and 11.6% on a year-over-year basis in 2023 and 2024, respectively.

ANSS outpaced estimates in all the trailing four quarters, delivering an earnings surprise of 11.6%, on average. The long-term EPS growth rate stands at 7.6%.

On the flip side, geopolitical instability, forex volatility and weakness in global macroeconomic conditions are likely to affect ANSYS’ performance as clients cut back on expenditure. Higher costs on product enhancements, acquisitions, and research and development are likely to exert pressure on margin expansion for this for this Zacks Rank #3 (Hold) stock.

Stocks to Consider

Some better-ranked stocks in the broader technology space are Dropbox (DBX - Free Report) , Badger Meter (BMI - Free Report) and Blackbaud (BLKB - Free Report) . While each of Dropbox and Blackbaud currently sport a Zacks Rank #1 (Strong Buy), Badger Meter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dropbox’s 2023 earnings has increased 10.1% in the past 60 days to $1.85 per share. The long-term earnings growth rate is anticipated to be 12.3%.

Dropbox’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of DBX have gained 17% in the past year.

The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.

Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have soared 101.9% in the past year.

The Zacks Consensus Estimate for Blackbaud’s 2023 earnings has increased 9.3% in the past 60 days to $3.75 per share.

Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 10.4%. Shares of BLKB have improved 30.3% in the past year


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