PTC (PTC) Valuation Check After Recent Share Price Weakness

Recent share performance and what it might signal

PTC (PTC) has recently traded under pressure, with the share price showing a 3.4% decline over the past day, 4.9% over the past week, and about 9.6% over the past month.

Over the past 3 months, the stock is down roughly 20.6%, while the year-to-date move is a 5.3% decline and the past 1-year total return is a 14.3% decline, setting a cautious backdrop for investors.

See our latest analysis for PTC.

With the latest share price at $161.11, PTC’s recent share price pressure has come after a period where the 1 year total shareholder return of 14.3% contrasts with a 3 year total shareholder return of 20.6% and a 5 year total shareholder return of 24.4%. This suggests that momentum has faded compared with longer term performance.

If PTC’s recent pullback has you reassessing your watchlist, this could be a useful moment to broaden your search and check out high growth tech and AI stocks.

So, with a recent pullback, annual revenue of about $2.7b, net income of roughly $734m and an intrinsic value estimate implying a 57% discount, is PTC genuinely on sale or is the market already pricing in future growth?

Price-to-Earnings of 26.1x: Is it justified?

At a last close of $161.11, PTC trades on a P/E of 26.1x, which current data suggests is below both peers and the wider US Software industry average.

The P/E multiple compares the share price to earnings per share and is a common way to gauge how much investors are paying for each dollar of profit in software companies where earnings quality and growth expectations matter.

For PTC, several factors sit behind this 26.1x multiple. Earnings have grown by 95% over the past year, ahead of the 13.3% per year pace over the past 5 years, and are described as high quality. At the same time, earnings are forecast to grow, but not significantly, and are expected to grow slower than the broader US market. This can help explain why the market does not assign a materially higher multiple.

Compared with the US Software industry average P/E of 31.6x and a peer average of 65.9x, PTC’s 26.1x looks materially lower. It is also below the estimated fair P/E of 29.1x, a level the market could move towards if sentiment shifted closer to that fair ratio benchmark.

Explore the SWS fair ratio for PTC

Result: Price-to-Earnings of 26.1x (UNDERVALUED)

However, you still have to weigh execution risks in complex PLM and IoT projects, along with the chance that softer earnings growth expectations will keep the valuation in check.

Find out about the key risks to this PTC narrative.

Another view on PTC’s value

Our DCF model values PTC at an estimated fair value of $378.53 per share versus the current $161.11, implying the shares trade at a 57.4% discount. That appears much steeper than the 26.1x P/E signal. Which lens do you consider more useful, and why?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out PTC for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 872 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own PTC Narrative

If you see the numbers differently or would rather test your own assumptions, you can crunch the data yourself in just a few minutes with Do it your way.

A great starting point for your PTC research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Before you move on, consider lining up a few fresh ideas now so you are not reacting later when others already have.

• Look for potential value opportunities early by scanning these 872 undervalued stocks based on cash flows that might be priced below their cash flow potential.
• Explore major technology themes by reviewing these 24 AI penny stocks that are tied to artificial intelligence.
• Build out your income watchlist by looking at these 13 dividend stocks with yields > 3% that may support a steadier stream of payouts.

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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