Industry Overview #1

Software solutions for the architecture, engineering, construction, product design, and manufacturing industries.

A short article analyzing the financial performance of leading software solutions companies in the AEC and manufacturing industries. These industries are appealing with forecasted growth rates at high single digits.

Revenue Growth

Procore leads in growth rates, soaring from $289 million in 2019 to $950 million in FY23. PTC follows, with Autodesk ranking third, showing steady growth post-transition to annual billings.

Profitability

Nemetschek leads, driven by its transition to subscriptions and higher media mix. Dassault maintains stable margins, with Autodesk showing promising growth.

Asset Turnover

Nemetschek leads in leveraging assets for sales, followed closely by Autodesk. Procore secures third place despite high growth levels. Bentley Systems' trajectory reflects challenges from overpriced acquisitions, impacting returns on capital and efficiency.

Returns on Capital

Autodesk leads, closely followed by Nemetschek. PTC secures third, showing stability despite recent fluctuations. This metric is pivotal, combining profitability, asset efficiency, and capital allocation.

Debt to Equity

Debt to Equity is vital for investors, indicating leverage and potential bankruptcy risk (should not be used in isolation). Procore leads, followed closely by Nemetschek. All companies demonstrate healthy ratios, with those with higher leverage trending downward over time.

Valuation

Procore was excluded due to its high NTM EV/EBITDA ratio of 75x, which would have distorted clarity. Autodesk appears most attractive with a ratio of 22.4x, compared to peers like Bentley and Nemetschek, which seem relatively pricey.

Estimated EPS growth

Procore, with 3-year estimates of 128%, 42%, and 52%, takes the top spot (not shown in the chart below). PTC and Nemetschek follow with growth rates of 17.5% and 17.1%, respectively, while Autodesk ranks fourth at 14.9%.

Total score

Based on our analysis, Autodesk and Nemetschek stand out as the most compelling companies. While Procore's score is noteworthy, we're cautious about companies with operating losses.

The full article can be found here: Industry Overview #1

Source of charts: Koyfin

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