Intrinsic Value ANSYS, Inc. (0HG3.L)

• Previous Close: £388.32
• Intrinsic Value: £134.53
• Upside potential: -65%

Stock Valuation Context

Business Model And Market Position

ANSYS, Inc. is a global leader in engineering simulation software, serving industries such as aerospace, automotive, healthcare, and high-tech. The company’s core revenue model is built on licensing its multiphysics simulation platforms, including ANSYS Workbench, SCADE, and Discovery, alongside maintenance and consulting services. Its software enables engineers to optimize product design by simulating structural, thermal, fluid, and electronic interactions, reducing reliance on physical prototyping. ANSYS holds a dominant position in the simulation software market, competing with firms like Dassault Systèmes and Siemens PLM. Its deep industry expertise, coupled with high switching costs due to embedded workflows, strengthens its competitive moat. The company also invests in high-performance computing and cloud-based solutions to address evolving customer needs. With a strong academic outreach program, ANSYS cultivates long-term user adoption among students and researchers, reinforcing its market leadership.

Revenue Profitability And Efficiency

ANSYS reported FY revenue of $2.54 billion, with net income of $575.7 million, reflecting a net margin of approximately 22.6%. The company’s operating cash flow stood at $795.7 million, demonstrating robust cash generation. Capital expenditures were modest at $44 million, indicating efficient reinvestment relative to revenue. The diluted EPS of $6.55 underscores disciplined cost management and scalability in its software-centric model.

Earnings Power And Capital Efficiency

ANSYS exhibits strong earnings power, driven by high-margin recurring software licenses and maintenance revenue. Its capital efficiency is evident in its low capex-to-revenue ratio (1.7%), typical of asset-light SaaS businesses. The company’s operating cash flow conversion rate (104% of net income) highlights effective working capital management and minimal capital intensity.

Balance Sheet And Financial Health

ANSYS maintains a solid balance sheet with $1.45 billion in cash and equivalents against $865.6 million in total debt, yielding a net cash position. The debt-to-equity ratio is conservative, supported by strong liquidity. The absence of dividends allows for reinvestment in R&D and strategic acquisitions to sustain innovation.

Growth Trends And Dividend Policy

Revenue growth is fueled by demand for simulation in electrification, autonomy, and IoT. ANSYS does not pay dividends, opting to reinvest free cash flow into product development and M&A. Its focus on emerging verticals like healthcare and energy positions it for sustained mid-single-digit organic growth.

Valuation And Market Expectations

With a market cap of $30 billion, ANSYS trades at a premium valuation, reflecting its leadership in simulation software and sticky customer base. Investors likely price in continued margin expansion and cross-selling opportunities, though macroeconomic headwinds could pressure discretionary tech spending.

Strategic Advantages And Outlook

ANSYS benefits from high barriers to entry, deep domain expertise, and a loyal customer base. Its outlook remains positive, supported by secular trends in digital engineering. Risks include competition from open-source tools and slower adoption in cyclical industries. Strategic partnerships with cloud providers could further enhance scalability.

Sources

Company filings, Bloomberg