Autodesk: unstoppable growth value
Autodesk (NASDAQ: ADSK) is one of the most successful software stocks of all time. The shares have risen nearly 28,000% since its IPO in the 1980s, beating the entire US market during that time. But don’t think it’s too late to get on the Autodesk train. The company has just released its report on first quarter results for fiscal 2022, and the results again show why it is one of the top growth stocks in the market. Here are four takeaways from the report.
1. The backlog is growing
In Autodesk’s first fiscal quarter, which ended April 30, its revenue increased 12% to $ 989 million, showing that its software solutions for the architectural industries , engineering and construction are resisting as parts of the world slowly emerge from the shadows of the COVID-19 pandemic.
Billings, including revenue plus the net change in deferred revenue, also increased 10% in the quarter. The most impressive measure, however, has been the growth in Autodesk’s backlog. Its remaining performance obligations (RPOs), which represent revenue awaiting recognition under existing contracts, rose 22% to $ 4.23 billion at the end of the quarter. This shows the predictability of Autodesk’s subscription model and the benefit of signing long-term contracts with its customers.
2. Fusion 360 continues to impress
Currently, Autodesk’s largest and fastest growing business is its Architecture, Engineering and Construction segment. But it’s also striving to gain market share in manufacturing and mechanical engineering with Fusion 360, a cloud-based design platform. Commercial subscriptions for Fusion 360 increased to 152,000 in the quarter from 140,000 in the prior quarter.
The use of the platform is growing so rapidly as it combines in one platform mechanical, electrical and industrial engineering modeling solutions that were historically disaggregated, and delivers them for a low annual price of around $ 500. $ per year. (Most legacy solutions cost $ 1,000 per year, if not more.) Management still thinks Fusion 360 has a long growth path ahead of it, saying on the conference call that they believe the platform has reached an “adoption tipping point” within the industry.
With 152,000 subscribers paying a low cost of $ 500 per year for Fusion 360 (a price that doesn’t include extensions like 3D printing), the platform only earns around $ 76 million per year – not a major revenue influx for a company that generated close to $ 1 billion in the last quarter alone. However, it shows that the cloud-based platform strategy is working to distance customers from traditional competitors such as Dassault Systèmes.
3. Its new acquisitions are perfectly suited
During the first quarter of the fiscal year, Autodesk made two acquisitions. One of them was Innovyze, a software analysis company for the utilities and water management industry, which it bought for $ 1 billion. Innovyze is an ideal complement to what Autodesk calls its “digital twin” strategy, which essentially means digital tracking of projects once they are completed and operational. It will also be easy to sell Innovyze’s services to large municipalities and general contractors by bundling the software with popular Autodesk products such as Revit, Civil 3D and its construction cloud solutions.
Innovyze is also likely to be a huge beneficiary of Biden’s infrastructure bill, assuming it passes. In its current form, this spending plan allocates $ 111 billion to upgrade water infrastructure, which would provide a tailwind for spending on solutions like those proposed by Innovyze.
Autodesk has also acquired a small start-up called Upchain, which has a cloud-based Product Lifecycle Management (PLM) solution that will fit seamlessly into Autodesk’s manufacturing segment. PLM software helps all stakeholders in complex engineering projects manage the evolution of a product, which hopefully saves money and reduces the time it takes to bring that product to life. on the market. It is also possible that Upchain’s solution will work in tandem with Fusion 360 (or be associated with it), further increasing Autodesk’s value proposition for its manufacturing, electrical and mechanical engineering customers.
4. Management reiterated its long-term orientations
From an investment perspective, the biggest takeaway from the fiscal first quarter report was management’s reiteration of its free cash flow forecast. Autodesk still expects to generate approximately $ 1.6 billion in free cash flow this fiscal year and $ 2.4 billion next year. With a market cap of $ 63 billion, Autodesk stock trades at a price to free cash flow (P / FCF) ratio of 39 based on its current year forecast and a P / FCF ratio. of 26 compared to forecast for next year.
With a large backlog and tons of growth opportunities ahead of it, there is no reason Autodesk cannot meet or approach these two-year forecasts, and continue to increase profitability over the next year. over the next five years and beyond. This makes it one of the more affordable growth stocks that investors can buy right now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.