Description

Ansys is cheap with a nice niche in the CAE (computer aided engineering) market. First, the company has approximately $4 per share in net cash. It should earn a little over $1 per share this year and according to analysts about $1.17 next. Take out cash and you get .90 in earnings this year for which you are paying $6. Sales are broken down about 2/3 license revenues and 1/3 maintenance and service. Last quarter, year over year sales growth was about 6%.

The company is looking for accretive acquistions and has been patient. Meanwhile they continue to buy back stock at a fair clip at these levels having just authorized an additional 1 million share buyback. Cash flow is higher than earnings. Return on equity is in the mid-20's if you leave out the cash and after-tax income to sales is on the order of 25%. A valuation of $15 per share seems more reasonable.

Catalyst

TA Associates owns 40% and at some point they may seek to realize value for their investment. Also, the company may spend the cash horde on something that actually earns money. In addition, business in Europe and Japan has been slow and the company says that should pick-up in the coming quarters.