Is PTC Stock a Buy, Sell or Hold?

PTC (NASDAQ:PTC) is a maker of product lifecycle management software tools. With PTC’s tools, manufacturers can derive insights relevant to both making and servicing their products. Despite enjoying a prime place in the PLM market, PTC has seen its stock prices retreat quickly over the last few months.

On a 3-month basis, shares of the company are down more than 20 percent. Is this depressed software stock a buy on the dip?

11% Growth Is Nothing to Sneeze At

Despite the share price retreat, PTC’s business has been quite strong. FY2025’s Q1 report, released in early February, detailed 7% year-over-year growth in ARR to $2.2 billion. On a constant currency basis, the growth was even more positive at 11 percent.

Quarterly revenue growth was lower but still positive, with revenues rising 3% from the year-ago quarter to $565 million.

The most positive aspect of the recent report, though, was a notable mushrooming of cash flow. Operating cash flow grew by 27% to $238 million, while free cash flow grew 29% to $236 million. In both cases, PTC beat its own previous guidance for the quarter.

Earnings per share posted a similarly impressive beat. PTC reported EPS of $0.68 against quarterly guidance of $0.28 to $0.52. Q1’s results represented a 23 percent increase in EPS, marking the company’s fourth consecutive quarter of earnings growth.

Looking forward to Q2, management projects that constant currency ARR will grow at about 9.5%. Free cash flow, meanwhile, is expected to rise to $270 million.

Over the next 3-5 years, analysts predict that EPS will continue growing at a compounded rate of over 16% per year. As such, it seems likely that PTC is set up for considerably more growth ahead.

PTC’s Moat Is So Wide

One of the biggest advantages PTC has both as a business and as an investment is its position as a major maker of product lifecycle software.

According to the company’s own reporting, 95 percent of the manufacturing companies in the Fortune 500 use PTC software.

The overall market for PLM software is expected to keep growing at a compounded annual rate of 7.3% between now and 2030, eventually reaching over $44 billion.

As a leader in the field, PTC is likely to capture much of this growth. The trend of expanding demand for PLM software is likely to bolster PTC’s top and bottom lines, allowing the company to sustain its growth for many years to come.

So, What’s Driving PTC Shares Down?

With relatively solid financials, beats in ARR, EPS and free cash flow, further growth projected ahead and a fairly strong moat, it may seem surprising at first that PTC has sold off so much.

The primary reason for this was management’s forward guidance, which is still fairly positive but fell short of what investors were expecting.

This was likely compounded by the fact that PTC shares traded at very optimistic valuations before they started dropping. As recently as last year, the stock was trading at nearly 80 times earnings. As such, it may have been particularly sensitive to any kind of negative news regarding future growth.

Another element that may be contributing to the decline in share prices is the potential disruption caused by pending tariffs. The sudden prospect of higher input costs and weaker consumer demand has been a shock to manufacturers, many of which are scrambling to prepare for the implementation of the tariffs.

Since PTC is deeply tied to the manufacturing market, the disruptions in the American economy at large appear to be putting macro pressures on its share prices.

Does PTC Look Undervalued?

With the stock down so far over the last few months, one of the first things investors may think to look at is whether the selloff has brought PTC down to a point of attractive valuation. The stock, however, still trades at fairly high levels.

PTC shares are priced at over 8x sales and nearly 50x earnings. While earnings growth is projected to be quite strong in the coming years, it’s clear that investors are still paying a bit of a premium for PTC even after the stock’s lackluster recent performance.

None of this, however, seems to have dissuaded analysts from taking a bullish view on where PTC will go over the next year.

Even with lower-than-expected guidance for Q2 priced in, the median price forecast for the stock is still $214.12. This would give it a projected upside of 32.9% compared to its last trading price of $161.16. Crucially, even the most bearish estimate of $170 is still above where the stock trades today.

Is PTC Stock a Buy, Sell or Hold?

Despite trading at 8x sales, PTC stock is a strong Buy according to analysts who see 32.9% upside to $161.16 per share.

While PTC may grow at a somewhat slower pace than investors had previously expected and encounter broader economic bumps in the road along the way, the company itself still seems to be doing well.

With free cash flows rising quickly and revenue and earnings growth remaining positive, the company appears to have basically good fundamentals behind it.

Another little tidbit to consider and may have been overlooked by many is the share repurchase program. Late in 2024, management authorized the buyback of up to $2 billion worth of PTC shares. About $300 million is expected to be deployed in 2025. This buyback program could provide support to share prices, especially if management decides to issue new authorizations once the $2 billion has been depleted.

While there are some risks related to PTC’s valuation and the macroeconomic picture as a whole, the stock could be a decent buy at the moment. Even without a dramatic rebound, PTC shares has the potential to compound gradually over the coming years as continued growth allows the company to keep expanding its bottom line. PTC seems to be a very solid business trading at a more or less fair price, giving it potential as a stock to buy and hold for the long run.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.