Why ANSYS Shares Sank

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of simulation software maker ANSYS (Nasdaq: ANSS  ) plunged as low as 10% today after its quarterly revenue and guidance missed Wall Street expectations.

So what: ANSYS' third-quarter EPS managed to top estimates, but a miss on the top line -- $199.8 million versus the consensus of $202 million -- coupled with downbeat guidance is triggering concerns over slowing growth going forward. Management blamed lengthening procurement cycles due to the weak economy for the outlook cut, giving momentum-seeking investors plenty of reason to exit the previously strong stock.

Now what: Management now sees full-year 2013 EPS of $3.00 to $3.12 on revenue of $885 million to $910 million, well below Wall Street's view of $3.22 and $930.4 million. "Customer interest remains strong, but we expect these macro-economic challenges and longer sales cycles to continue through the remainder of the year and into the next," said CEO Jim Cashman. "At the core of the business, the long-term remains driven by customer reliance on our solutions to help fuel their internal innovation." However, when you couple the short-term headwinds facing ANSYS with the stock's still-lofty 30-plus P/E, I'd wait for a much bigger pullback before buying into that bullishness.

Interested in more info on ANSYS? Add it to your watchlist.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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10/24/2016 10:29 AM
ANSS $92.53 Up +1.42 +1.56%
ANSYS CAPS Rating: *****