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Thursday, November 02, 2006

We Dropped the Ball on Ansys

By William Trent, CFA of Stock Market Beat

Back in April we called Ansys (ANSS) a neat little company, a leading provider of simulation software for engineers. It is able to model the physical forces that products will be exposed to. Not very long ago this technology was limited to a few high-level engineers with highly sophisticated computers. It is increasingly becoming usable by every designer with a recent model workstation, which offers a wide new market for Ansys and the ability to streamline workloads for Ansys’ customers.

Then in May we did a complete fundamental workup, concluding:

Ansys is a fast growing software maker with generally strong fundamentals. Although adjustments to normalize EPS would result in a $0.02-$0.03 reduction to Q106 EPS, the company beat estimates in the quarter by $0.07, rendering the normalizations somewhat moot. The strong fundamentals appear well recognized, as consensus estimates for revenue and EPS are higher than management guidance, which may justify a cautious approach toward building positions.

That was a good call, as the chart below illustrates. Unfortunately, we seem to have fallen asleep at the wheel since there were no further posts. Which is too bad, given today’s news:

Ansys Inc., a maker of engineering simulation software and technologies, said Thursday that its third-quarter profit fell 25 percent, but results surpassed Wall Street expectations excluding one-time items.

Shares of Ansys rose $6.50, or 14.4 percent, to $51.75 in morning trading on the Nasdaq.

Where were we in July, anyway? We’ll try to pay more attention next time.

The author may hold a position in the securities discussed. The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options

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