Running With Microsoft: Under the Radar

"Under the Radar" uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

BOSTON (TheStreet) -- A handful of software stocks, including Microsoft(MSFT Quote) and Sybase(SY Quote), recently hit 52-week highs. Here's a lesser-known application-designer that reached that same milestone.

Canonsburg, Pennsylvania-based Ansys(ANSS Quote) designs software for product engineering. Its applications are used by aerospace, automotive, manufacturing and electronics companies. Over the past three years, Ansys has increased revenue 31% annually, on average, as profit climbed 94%. Investors seeking a growth company with ample margins, look no further.

Third-quarter net income increased 18% to $31 million and earnings per share climbed 14% to 33 cents. Revenue rose 5% to $128 million. The company's operating margin jumped from 31% to 38% on lower expenses.

Ansys repaired its balance sheet during the recession. Its cash balance has risen 26% to $294 million since the year-earlier quarter and debt has fallen 17% to $232 million, giving Ansys a liquid tilt. We give the company a financial-strength score of 8.9 out of 10, higher than the "buy"-list average of 7.1. Ansys also receives top marks for growth and volatility, placing it near the top of our 5,000-strong coverage universe.

A shortcoming is the company's return on equity, a key measure of profitability. In the latest quarter, its 9% return lagged the industry's 20% mark, but beat the S&P 500's 3% figure. Its stock has rallied 40% this year, more than major U.S. indices. As a result, Ansys is more expensive than application-software peers based on trailing earnings, projected earnings and sales. But the shares are cheap when considering book value.