NEW YORK (TheStreet) -- It would be a gross understatement to say expectations are high for architectural software design specialist Autodesk (ADSK). Ahead of the company's first-quarter earnings results Tuesday, ADSK stock is valued at 168 times earnings, which is eight times higher than the average for the S&P 500. This means investors are betting a lot on ADSK stock to deliver future profits. But when's that going to happen?
Autodesk was trading Monday morning at $58.49, down about 0.5%. While the shares are down about 2.6% on the year, they've done well over the past twelve months, gaining about 23%, against 11% gains for the Dow Jones Industrial Average (DJI). And for this reason -- among others -- investors should lock in some profits and move on to better prospects.
After its earnings for the last fiscal year fell 65%, Autodesk is projected to only break even in fiscal 2016, earning $1.17 per share. And even though 2017 estimates of $1.43 imply 22% growth, revenue is projected to grow at only around 3% for all of 2017, suggesting much of that anticipated earnings growth would be owed to things like restructuring, cost-cutting and stock buybacks.
To its credit, Autodesk, headquartered in San Rafael, California, has done what once appeared impossible -- transforming how its sells traditional software from delivering its products in boxes to a subscription-based license model. It's the same sort of shift that has been successful for the likes of Adobe (ADBE). And it has served Autodesk well.