Has the Market Mispriced PTC After Its SaaS Push and Recent Share Price Dip?

• Wondering if PTC at about $178 a share is quietly turning into a bargain or if most of the upside is already priced in? You are not the only one trying to make sense of its current valuation.
• After a choppy year that has left the stock down roughly 5.0% over 12 months and about 2.6% year to date, the recent 1.2% move over the last week and 3.6% over the last month hints that sentiment could be starting to turn.
• Investors have been digesting a steady stream of updates around PTC's push into SaaS based product lifecycle management and strengthened partnerships with major industrial players, reinforcing the long term story around digitized manufacturing. At the same time, broader market rotations between growth and quality names have amplified moves in software stocks like PTC, helping explain some of the volatility in its share price.
• Right now, PTC scores a 6/6 valuation check, suggesting the market may be underestimating its fundamentals. Next, we will unpack how that looks through different valuation lenses as well as an even more intuitive way to think about what the stock is really worth.

Find out why PTC's -5.0% return over the last year is lagging behind its peers.

Approach 1: PTC Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and then discounting them back to the present. For PTC, this means looking at the cash it can return to shareholders over time and translating that into a per share value in $.

PTC currently generates about $846.6 million in free cash flow, with analyst and internal projections suggesting this could rise to roughly $3.7 billion by 2035. The 2 Stage Free Cash Flow to Equity model first uses more detailed near term forecasts and then tapers growth assumptions as the business matures, reflecting a more conservative long run outlook.

When all those future cash flows are discounted back to today, the model arrives at an intrinsic value of about $378 per share. With the stock trading around $178, the DCF output indicates it is roughly 52.9% below that estimate of intrinsic value, based on these specific model assumptions.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests PTC is undervalued by 52.9%. Track this in your watchlist or portfolio, or discover 917 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for PTC.

Approach 2: PTC Price vs Earnings

For profitable software companies like PTC, the price to earnings, PE, ratio is a practical way to judge valuation because it links what investors pay today to the profits the business is already generating. In general, higher growth and lower perceived risk can justify a higher PE, while slower or more uncertain growth usually commands a lower, more conservative multiple.

PTC currently trades on a PE of about 29x. This sits just below the broader Software industry average of roughly 31x and well under the peer group average of around 78x, suggesting the stock is not being priced as aggressively as some growth names. Simply Wall St also calculates a Fair Ratio of about 30x, a proprietary estimate of what PTC’s PE should be once you factor in its earnings growth outlook, profitability, industry positioning, market cap and key risks.

This Fair Ratio is more tailored than a simple peer or industry comparison because it weighs PTC’s specific strengths and vulnerabilities rather than assuming all software businesses deserve the same multiple. With the Fair Ratio only slightly above today’s 29x PE, the multiple based view points to PTC being valued about in line with its fundamentals.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your PTC Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to attach your story about a company to the numbers, by turning your view on PTC’s future revenue, earnings and margins into a clear forecast and a Fair Value that you can compare with today’s price.

On Simply Wall St’s Community page, used by millions of investors, each Narrative links three things together: the business story you believe, the financial forecasts that follow from that story, and the Fair Value those forecasts imply, so you can quickly see whether your Narrative says PTC is a buy, a hold, or a sell at current levels.

Narratives stay dynamic, automatically updating when new earnings, news, or guidance land, and you can see how different investors interpret the same information. For example, one bullish PTC Narrative might lean toward a Fair Value near the higher end of recent targets, around 250 dollars, while a more cautious Narrative could sit closer to 190 dollars. This gives you a concrete, numbers based way to compare perspectives and decide which version of PTC’s future you actually believe in.

Do you think there's more to the story for PTC? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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