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PTC · Analyze
Date: 2026-07-14 | Price: $123.52 | Sector: Technology (Industrial software — PLM/CAD/IoT) | Verdict conviction: [7.0] — BUY
Snapshot
| Metric | Value |
|---|---|
| Price | $123.52 (below $130–140 entry) |
| ARR | $2.388B (+8.5% CC, Q2 FY26 high-end) |
| FY26 FCF guide | ~$850M |
| P/FCF | ~16.8x (at current price) |
| TTM P/E | ~11.8x |
| EV/EBITDA | ~12.9x (low end of its range) |
| Gross / op / net margin | 83.8% / 36.4% / 26.8% |
| ROE / ROIC | 42.7% / 15.3% |
1. Fundamentals — 🟢 excellent, margins inflecting
- ARR $2.388B, +8.5% constant-currency (Q2 FY26, high end of guide); FY26 ARR growth guided 7.5–9.5%.
- FCF +14% YoY, above guidance; FY26 FCF ~$850M. FCF/sh ~$7.36.
- Operating margin ripped from 25.5% (FY24) → 36.4% (FY25) — the integration of Codebeamer/ServiceMax is paying off. Gross margin 83.8%, net margin 26.8%, ROE 43%.
- Capital return stepping up: $250M repurchased in Q2, new $2B buyback authorized through FY2028. Net debt from acquisitions is the offset (deeply negative tangible book = goodwill) but FCF covers it comfortably.
2. Moat — 🟢 sticky, AI-insulated
PTC owns mission-critical PLM (Windchill), CAD (Creo), and industrial IoT workflows embedded in discrete-manufacturing engineering orgs. Switching costs are severe — product data, BOMs, and design history live in these systems for the life of a product line. This is the anti-CTSH/ACN: AI is a demand driver here (AI-driven modernization of engineering data), not a disruptor, because the moat is proprietary customer data + deep integration, not labor arbitrage.
Adversarial test: Autodesk/Dassault/Siemens are the real competitors, not a startup — and displacing an installed PLM backbone is a multi-year, high-risk migration few customers attempt. Efficient-scale + switching-cost moat.
3. Valuation
| Model | Output |
|---|---|
| P/FCF | ~16.8x on $850M FCF, below its own 5-yr average (~22x) |
| EV/EBITDA | ~12.9x — bottom of its range |
| FCF-based fair value | 20–22x FCF/sh $7.36 → $147–162 |
| Bogle | ~0% yield + ~10–12% ARR/FCF growth + re-rating optionality |
Fair value $145–165 (base ~$155). Current $123.52 = ~20–30% upside for a 36%-margin, 43%-ROE compounder buying back stock.
Verdict — BUY [7.0]
Great business, now on sale below its entry zone: high-retention industrial-software ARR, margins inflecting, a fresh $2B buyback, and — crucially — a moat that AI feeds rather than erodes. The catch is modest top-line growth (high-single-digit ARR) and an acquisitive balance sheet, so it's a steady compounder, not a rocket.
- Entry: attractive at $123.52; add to $115, strong buy <$110. Trim $175+.
- Size: solid core-tech candidate for Beta — a cleaner AI-insulated software hold than the AI-services names (CTSH/ACN).
- Risks: (1) macro-sensitive industrial capex; (2) leverage/goodwill from M&A; (3) FX (large European base).
- Thesis break: ARR growth falls below ~6% for 2 quarters, or FCF guidance cut.
Sources: roic.ai; PTC Q2 FY26 results. Public.com quote.