Aspen Technology, Inc.
), a leading software and services provider targeting process
industries, reported solid fiscal first quarter results on November
1. This Zacks #1 Rank (Strong Buy) has now delivered an average
earnings surprise of 213.0% over the past 4 quarters. The Zacks
Consensus Estimates for 2013 and 2014 have each advanced in the
past 7 days, indicating strong growth for both years.
Solid First Quarter Beat
Aspen Technology reported first quarter earnings per share (EPS) of
5 cents, reversing a loss of 12 cents in the year-ago quarter and
topping the Zacks Consensus Estimate by 600%.
Revenues grew 39.6% year over year to $71.5 million on the back of
strong growth in total license contract value.
Cost control efforts were largely responsible for the operating
margin expansion and the overall profitability of the company.
Earnings Estimates Trending Upward
Over the past 7 days, the Zacks Consensus Estimate for fiscal 2013
moved up 40% to 14 cents, which suggests year-over-year growth of
nearly 193%. Meanwhile, the Zacks Consensus Estimate for fiscal
2014 is up 2.6% to 40 cents over the same timeframe.
Premium Valuation Makes Sense
Considering the company's growth prospects, a premium valuation
appears justified. The stock has a PEG ratio of 18.0, compared with
the peer group's (1.8). Aspen Technology is also trading at a P/S
and P/B of 9.39x and 22.85x, respectively, representing premiums of
55.5% and 177.3% from peer group averages of 6.04x and 8.24x.
Chart Shows Growth Potential
The 12-month EPS chart clearly shows that both share prices and
earnings have remained volatile over the last few years. But the
price movement has been in tandem with EPS growth over the last
couple of years.
Currently, the share price is hovering around $27.00. Since
consensus estimates show a smooth upward trend through 2015, share
price increases should also be consistent.
Founded in 1981, Massachusetts-based Aspen Technology provides
process optimization software solutions, which help in optimizing
plant and process design, and in increasing operational efficiency
and supply chain planning. The company operates through three
segments, namely License, Software maintenance and support (SMS)
training and other, and professional services. The company has more
than 1,500 customers, including manufacturers in process industries
and engineering and construction firms that help in design and
build process manufacturing plants.
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