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TheStreet Open House

Why Autodesk (ADSK) Was Upgraded By JPMorgan

Stocks in this article: ADSK

NEW YORK (TheStreet) -- Autodesk (ADSK) was upgraded to "overweight" from "neutral" by JPMorgan.

Autodesk gained 2.9% to $51.11.

The software company should benefit from coordinated manufacturing expansion according to the firm.

"Over the last six months, there has been a material improvement in the global manufacturing economy. We would note that such periods of coordinated manufacturing expansion historically have been excellent periods for the design software companies like ADSK. This combined with our expectation of improved lifetime customer value caused by the move to a subscription-oriented business model we believe will create shareholder value and stock outperformance," analyst Sterling Auty wrote.

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Separately, TheStreet Ratings team rates AUTODESK INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate AUTODESK INC (ADSK) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 95.9% when compared to the same quarter one year prior, rising from $29.40 million to $57.60 million.
  • ADSK's revenue growth trails the industry average of 12.0%. Since the same quarter one year prior, revenues slightly increased by 1.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.35, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that ADSK's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.49 is high and demonstrates strong liquidity.
  • Powered by its strong earnings growth of 92.30% and other important driving factors, this stock has surged by 40.69% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • AUTODESK INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AUTODESK INC reported lower earnings of $1.07 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.61 versus $1.07).

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