Investors Still Waiting For A Pull Back In ANSYS, Inc. (NASDAQ:ANSS)

ANSYS, Inc. -1.73%

ANSYS, Inc.

ANSS

334.20

-1.73%

With a price-to-earnings (or "P/E") ratio of 65x ANSYS, Inc. (NASDAQ:ANSS) may be sending very bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 16x and even P/E's lower than 9x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Recent times have been pleasing for ANSYS as its earnings have risen in spite of the market's earnings going into reverse. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for ANSYS

pe-multiple-vs-industry
NasdaqGS:ANSS Price to Earnings Ratio vs Industry December 29th 2023
If you'd like to see what analysts are forecasting going forward, you should check out our free report on ANSYS.

How Is ANSYS' Growth Trending?

ANSYS' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a worthy increase of 3.4%. The latest three year period has also seen a 24% overall rise in EPS, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 20% per annum during the coming three years according to the analysts following the company. With the market only predicted to deliver 13% per year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that ANSYS' P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of ANSYS' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for ANSYS with six simple checks will allow you to discover any risks that could be an issue.

You might be able to find a better investment than ANSYS. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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