Ansys' Q3 Sees Simulation Uses Expand Across Product Lifecycle; Shares Overvalued

Wide-moat Ansys’ third-quarter results were strong, as the company's clients keep up robust investment in research and development and simulation makes its way into new use cases along the product lifecycle, thanks to the push for smart devices and manufacturing. The company managed to beat FactSet consensus on the top and bottom lines as well as our forecasts, even with our expectations ahead of consensus estimates. With these strong results, Ansys inched its full-year outlook higher, as its stressed its confidence that it is not affected by supply chain constraints because its simulation offerings are tied to the product design, not the number of products manufactured. We are maintaining our $242 fair value estimate for the simulation standard firm. With the shares up nearly 5% upon results to above $400, we continue to view Ansys as significantly overvalued. We have strong conviction in this thesis, as our model already implies robust top-line growth and outstanding margin expansion over the next 10 years coupled with a below-average cost of equity.