Autodesk: Strong Growth and Profitability, Analysts See Upside

Autodesk Inc. (ADSK) is a leading software developer for various industries, including construction, manufacturing, architecture, and engineering. Its mission is to help people and businesses overcome problems by creating technology that transforms how work is done. The company’s core products include AutoCAD Civil 3D, Maya, Revit, and Autodesk 360.

I am bullish on Autodesk as it has a very robust growth outlook, looks cheap relative to historical averages, and its price target implies massive upside over the next year.

The company also provides manufacturers with tools for modeling, animation, digital sculpting, video game designing, and visual effects. Autodesk sells products to customers through its online store and network of resellers and distributors. The firm is headquartered in the United States but maintains operations across Europe, the Middle East, Africa, and Asia-Pacific.

Strengths

Autodesk organizes its portfolio of products into four main markets, including AutoCAD and AutoCAD LT, Manufacturing, Media and Entertainment, and AEC (Architecture, Engineering, and Construction). Each core business is growing aggressively and has remained resilient throughout the pandemic.

More importantly, Autodesk managed to adapt to the cloud and transform its services accordingly, allowing it to withstand the disruptions associated with the global pandemic. 

In terms of competition, Autodesk has very few rivals, with Adobe’s suite of software services being a close counterpart. Autodesk’s software tools are considered to be industry-standard, and very few architects, engineers, and designers can operate without their suite of services.

Recent Results

Autodesk’s revenue rose to $1.13 billion in 2021, representing a year-over-year increase of 18%. Revenue of $4.2 billion in the last 12 months puts Autodesk ahead of many competitors. The revenue from Design was $994 million, an increase of 17% percent (15% on a constant currency basis). The AutoCAD and AutoCAD LT series are said to be the company’s top-performing products.

Valuation Metrics

ADSK stock looks inexpensive here as it trades well below its three-year valuation multiple averages on a forward EV/EBITDA ratio and forward price-to-normalized-earnings ratio. Its forward EV/EBITDA ratio is 29.7 times compared to its historical average of 38.43 times, and its forward price-to-normalized-earnings ratio is 36.55 times compared to its historical average of 51.7 times.

Meanwhile, analysts expect revenue to increase by 17.6% in 2022 and normalized earnings-per-share to increase by 36.4% in 2022.

Wall Street’s Take

Turning to Wall Street, ADSK stock earns a Strong Buy consensus rating based on 13 Buys, two Holds, and one Sell rating in the past three months. Additionally, the average Autodesk price target of $340.00 puts the upside potential at 43.8%.

Summary and Conclusions

ADSK stock is being bolstered by strong growth and profitability momentum, which appears set to continue for the foreseeable future, according to analyst projections.

On top of that, Wall Street analysts are overwhelmingly bullish on the stock here, and the average price target implies massive upside potential over the next year.

Last but not least, the stock looks quite attractively priced relative to its historical valuation multiples. As a result, it looks like it might be a good time for investors to add shares of the stock.

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