PTC INC. 
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PTC is a major player in SaaS (Software as a Service) software for industrial companies. Its portfolio includes solutions in various fields, including :
Industrial Internet of Things (IIoT)
A study by Ubisense reveals that 60% of global manufacturers have already adopted IIoT in their operations, and 75% plan to invest further to strengthen their resilience in the face of challenges such as manpower shortages and technological disruptions. PTC is an active contributor to this ecosystem.
The group provides solutions that link devices and people via an integrated platform, enabling real-time monitoring of production machines through sensors and actuators. These advanced technologies are crucial for preventive maintenance, remote diagnostics, fault prediction and the automation of maintenance and production processes. The impact on business is significant, reducing time-to-market, minimizing production downtime and lowering maintenance costs, thus maximizing productivity and revenues.
The company competes with established market players such asIBM, Oracle, SAP and Software AG.
Product Lifecycle Management (PLM)
PTC also offers solutions for coordinating product development data and processes. Its software enables dynamic data visualization, real-time collaboration between dispersed teams, and automated compliance with industry standards. These solutions simplify a product's journey from design to end-of-life, and accelerate time-to-market thanks to superior interoperability.
The Group competes in this sector with Siemens and Dassault Systèmes SE.
Computer-aided design (CAD) software
When it comes to Computer Aided Design (CAD) software, PTC stands out with Creo, a flagship product that integrates AI to enable engineers to create accurate 3D prototypes of products and assembly parts in a variety of sectors. Creo offers advanced rendering and generative design capabilities, optimizing prototypes according to criteria such as weight, strength and cost, and simulating product performance under realistic conditions, reducing the need for physical prototypes.
Augmented reality (AR) for industry
The Group is also developing AI-enhanced solutions for the transmission of work instructions and remote training through immersive simulations in real working environments, thus limiting physical travel. They also integrate AI-enhanced visual inspection functions for quality control. The contribution of this technology is considerable, optimizing workforce efficiency and reducing integration costs.
In this market, PTC competes with players such as TeamViewer SE and Scope Technologies.
An effective business plan
The company serves over 25,000 customers worldwide. Its sales force is 75% focused on large corporations, with the remainder coming from third-party resellers targeting the SME market.
Its growth is underpinned by a combination of strategic acquisitions such as Servix Max, Code Beamer and Puresystems, which have enriched its SaaS offering, and partnerships with well-known companies such as Microsoft, Rockwell Automation and Bosch.
PTC's revenues come mainly from two deployment models:
Cloud Support and Services (98% of sales): Customers subscribe to access PTC software in the cloud, ensuring recurring revenues. These services include secure hosting, scalability and integration options, with rates adjusted according to needs.
License sales - On-premise (2% of sales): Customers acquire perpetual licenses to use PTC solutions on their own infrastructures.
Some 49% of revenues came from the Americas, 36% from Europe and 15% from Asia-Pacific.
Outperforming the market
PTC boasts particularly robust operating margins, approaching 40%. It also has the best revenue growth potential in its sector, with an anticipated CAGR of 12% over the next three years. Operating income is projected at around $860 million in 2024, which would represent a tripling in five years. The free cash flow (FCF) margin is close to 30%.
The Group regularly reports results ahead of expectations, with double-digit surprise rates, notably in the third quarter, when it exceeded earnings per share (EPS) estimates by 13%. By comparison, its nearest competitor, Dassault Systèmes, exceeded expectations by just 2%, and has less promising prospects in terms of revenues and profitability.
On the balance sheet, the company has a net cash surplus of $289 million for 2023. It plans to reinvest all its FCF in debt repayment, with a two-and-a-half-year maturity based on the net debt/FCF ratio.
Stock market indicators
Market capitalization reaches $21 billion. The share price has maintained its upward trajectory on the market, rising by 360% over ten years and 20% over the past year.
The analyst consensus is for an average price target of +16%, and 80% of analysts recommend buying or accumulating the stock.
However, despite growing faster than its sector, PTC shares are trading at a discount of around 20% (P/FCF: x28 vs. x34). An anomaly, one might say. Nevertheless, this can be justified by several factors: PTC's presence in oligopolistic markets with relatively low market shares, the dominance of European companies in the CAD and PLM markets, which are better perceived overall in terms of operational efficiency, and the fact that PTC's market share is relatively low.The challenges associated with PTC's cloud strategy, notably the transition from local (on-premises) infrastructures to the cloud.
However, analysts see PTC as an undervalued stock by the market, and anticipate a narrowing of the discount as the company continues to outperform expectations.
Here's a brief summary:
Highlights
- High profitability and successful subscription model.
- Discount and strong growth
- Strong demand for its PLM, CAD and IIoT software in the industrial sector
- Reinvestment in growth and debt repayment
- Named leading supplier in ABI Research's Competitive Assessment 2024
- Given its sector discount and moderate size, PTC could be the target of a major generalist player.
Weak points
- The digital transition in the manufacturing industry lacks agility and requires resources.
- European companies dominate the market
- Dependence on adjacent markets and customers' financial health
- Lack of dividend distribution
