Stock markets are very volatile, especially among growth stocks. With many companies down 40%, 50% or even 60% from their all-time highs, it’s a pain to endure these steep losses. Therefore, many investors may look for more resilient companies for their portfolios.
Autodesk (ADSK -1.41%) It may be suitable for these investors. The stock of the design software business is down 27% year-to-date, far better than other tech stocks. Despite this short-term dip in volatility, the company has dominated the market over the past decade with returns of over 550%. So if you’re worried about another market downturn and looking for a combination of growth and stability, Autodesk may be for you.
Why Autodesk Is A Stable Stock
One of the reasons this design software company’s stock price is so resilient is because it offers a very tenacious, mission-critical service. Autodesk’s AutoCAD (computer-aided design) software is the dominant force in the industry with a 37% market share. Plus, it’s a top dog in construction spaces.
More importantly, the company is likely to maintain this lead. Once you learn how to use these tools and integrate them into your business, moving to another platform can be very difficult. This may be why the company’s second quarter (ending July 31, 2022) revenue increased 17% year-over-year to his $1.2 billion despite the difficult macroeconomic conditions. Hmm.
Another reason this stock is favored during market turmoil is its shareholder-friendly behavior. So far this fiscal year, Autodesk has bought back $708 million of his stock. This is his 256% increase over the same period last year.
another great quarter
As Autodesk CEO Andrew Anagnost explains, the company’s dominance has seen little impact from the challenging environment facing the world today. Geopolitical, macroeconomic, policy and COVID-19 related factors. “
This is also seen in demand from Autodesk’s largest customers. The company closed seven of his deals above $500,000 in the second quarter, three of which exceeded his $1 million. This shows that companies continue to rely heavily on Autodesk and are willing to pay for its services even in the face of difficult economic times.
Autodesk also continued to dump cash. In the second quarter, the company had an operating margin of 20% and a free cash flow margin of 20%. Additionally, Autodesk expects a free cash flow margin of 41% for the full year. This cash will help the business maintain its leadership position and may leave enough to fund new opportunities.
What will Autodesk look like in 2032?
Autodesk primarily operates in the pre-construction stage of business operations, helping builders plan their projects. However, the company has also emerged as a full-fledged player in the project management space, where it has already begun to see success. In the second quarter, the company won a customer using his Autodesk Build, a pre-construction and project management tool.
The company is chasing an opportunity management thinks the construction, engineering and building market alone is worth $36 billion. It goes without saying that we have a strong presence in the manufacturing and media/entertainment sectors. Given that the company is expected to generate about $5 billion in revenue this fiscal year, Autodesk has only maximized its potential.
Is it time to buy Autodesk?
The main drawback of this stock is that the stock price is not cheap. The company trades at 28x his free cash flow, which is high compared to the broader tech landscape.That said, stocks are much cheaper than rival stocks procore technologies (PCOR 0.07%).
Despite its high valuation, Autodesk may be worth buying today. Due to the company’s competitive advantage, it has seen healthy adoption, which could last for a long time. With favorable expansion into new business segments, Autodesk still has a lot of room to go. On the flip side, this company offers stable returns to its shareholders. So, if you’re looking for the benefits of growth stocks with low volatility like stable stocks, Autodesk may be the right fit for you.
Jamie Louko holds a position at Autodesk. The Motley Fool has positions in and endorses Autodesk and Procore Technologies, Inc. The Motley Fool’s U.S. headquarters has a disclosure policy.