This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Autodesk Can't Seem to Design a Growth Plan

NEW YORK ( TheStreet) -- There appears to be a recurring theme with CAD/CAM software company Autodesk (ADSK - Get Report).

It seems that although the company is doing well managing costs and maintaining its adjusted margins, there just isn't enough revenue growth to justify its current valuation.

Granted, profitability is the name of the game. And the company's management deserves a lot of credit for doing what needs to be done to produce on the bottom line. On the other hand, it seems that investors have become confused as to whether to treat the company as a growth stock or a mature company -- it can't be both.

The Quarter That Was

For the period ending in October, Autodesk reported revenue of $548 million, down $1 million from the same period a year ago. Its GAAP operating margin also declined, from 16% last year to only 6% this quarter. Revenue for Europe, the Middle East and Africa did an about-face, declining 3% to $196 million after increasing by 3% in Q3 fiscal 2012.

On the other hand, profitability was more respectable. Its non-GAAP operating margin increased 190 basis points to 26%, compared to 25% in the third quarter of fiscal 2012. As noted above, cash flow from operations continued to impress -- arriving at $157 million and growing 14% year over year.

Non-GAAP diluted earnings were 47 cents per share, beating analysts' estimates and increasing 7% from a year before.

I just don't believe this is enough to support a stock that is already trading at a price-to-earnings ratio of 31, when other software companies such as Microsoft (MSFT) and Adobe (ADBE) trade at much lower P/Es (14 and 22, respectively).

Adobe seems to present the much better value. In its most recent quarter, Adobe reported a 7% increase in revenue with roughly 5% in organic growth. The company's digital media segment grew 3% while its digital marketing segment produced a decent growth figure of 21%. Yet Adobe trades at a P/E ratio that is almost 10 points less than Autodesk's. So from the standpoint of revenue growth, Adobe presents the much better value.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ADSK $58.73 0.00%
AAPL $94.19 0.00%
FB $118.06 0.00%
GOOG $695.70 0.00%
TSLA $222.56 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs