Strong Cash Yield: Is PTC Stock A Buy?
PTC (PTC) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market
PTC Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 5.5%, but PTC stock does
- Strong Margin: Last 12 month operating margin of 38.6%
- Growth: Last 12 revenue growth of 23.6% – low growth, but this selection is all about high yield and margin
- Valuation: PTC stock currently trading at 38% below 2Y high, 15% below 1M high, and at a PS lower than 3Y average.
Below is a quick comparison of PTC fundamentals with S&P medians.
| PTC | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Application Software | – |
| Free Cash Flow Yield | 5.5% | 4.3% |
| Revenue Growth LTM | 23.6% | 6.8% |
| Revenue Growth 3YAVG | 14.0% | 5.5% |
| Operating Margin LTM | 38.6% | 18.6% |
| Operating Margin 3YAVG | 28.5% | 18.1% |
| PE Ratio | 19.6 | 24.3 |
*LTM: Last Twelve Months
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But What Is The Risk Involved?
While PTC stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. PTC took a hit of about 86% during the Dot-Com Crash, and it wasn’t much better in the Global Financial Crisis with a 67% drop. The 2018 sell-off and Covid dip pulled it down roughly 41% and 45%, respectively. Even the recent inflation shock led to a 36% slide. So, no matter how solid things look, PTC’s history shows it can get hit hard when markets turn sour. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read PTC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
For more details and our view, see Buy or Sell PTC Stock.
Stocks Like PTC
Not ready to act on PTC? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few year average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
Portfolios Are The Smarter Way To Invest
Stocks soar and sink – the key is staying invested. A balanced portfolio helps you ride market volatility, boosts gains, and reduces single stock risk.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as evident in HQ Portfolio performance metrics.