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Here's Why Investors Should Consider Buying Aspen (AZPN)

Aspen Technology AZPN appears to be a promising stock to add to the portfolio to tackle the current macroeconomic and geopolitical uncertainties and benefit from its healthy fundamentals and growth prospects.

Let’s look at the factors that make the stock an attractive pick:

Shares Outperformed: Wall Street is facing extreme volatility due to macroeconomic factors, such as rising inflation and interest rate hikes by the Federal Reserve, increased crude oil prices and lingering supply-chain woes.

The above-mentioned factors are taking a toll on major U.S. indices. In the past year, the S&P 500 has fallen 5.3%.

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The stock is down 16.4% from its 52-week high level of $263.59 on Oct 6, 2022, making it relatively affordable for investors. AZPN has increased 52.1% in the past year against a 17.5% plunge in the Zacks sub-industry.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Positive Earnings Surprise History: AZPN has an impressive surprise record. Earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 5.2%.

Solid Rank: AZPN currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Robust Estimates: The Zacks Consensus Estimate of 2023 and 2024 earnings is pegged at $7.10 and $7.42, respectively.

Also, revenues for 2023 and 2024 are estimated to be between $1.17 billion and $1.27 billion, indicating year-over-year growth of 65.1% and 8.4%, respectively.

The company reported second-quarter fiscal 2023 non-GAAP earnings of 35 cents per share, missing the Zacks Consensus Estimate of $1.27. The company reported non-GAAP earnings of 46 cents per share in the year-ago quarter.

The company reported revenues of $242.8 million compared with $81.8 million in the year-ago quarter. However, revenues missed the Zacks Consensus Estimate by 10.7%.

Growth Prospects: Aspen Technology provides asset optimization software solutions that assist in optimizing process manufacturing by supporting real-time decision-making, predicting equipment failure and providing the ability to forecast and simulate potential actions.

Per a report available on Markets and Markets, the enterprise asset management market was estimated at $4.2 billion in 2022 and is projected to reach $7 billion by 2027, registering a CAGR of 10.5% between 2022 and 2027.

Also, the company benefits from the rapid adoption of cloud-based solutions, integration with big data analytics, increased proliferation of the Internet of Things and increased investment in software.

The integration of Emerson’s OSI business is likely to help Aspen develop its transmission and distribution offering to support power grid modernization and ensure grid reliability. In February, the company announced that it is combining its AIoT Hub with inmation Software to develop a new business unit called AspenTech DataWorks, providing customers with a flexible and scalable solution for managing industrial data.

Strategic Collaborations & Product Launches: In December, the company announced a collaboration with Aramco to help capital-intensive industries develop new solutions for Carbon Capture and Utilization. The partnership is aimed at reducing carbon emissions and identifying the most viable pathway for carbon capture and utilization by considering economics, process design and operations constraints and carbon-dioxide reduction.

Prior to that, the company announced the availability of its latest aspenONE software release - V14. It includes more than 100 sustainability sample models for the development of projects that reduce carbon footprints, like hydrogen economy, bio-based feedstocks and renewable energy.

Few Headwinds

Apart from its solid fundamentals, the company is prone to several risks. The company operates in a highly competitive and capital-intensive asset optimization software market. This is likely to negatively impact the company’s performance.

Also, frequent acquisitions made by the company lead to integration risks. As of Dec 31, 2022, Goodwill and net intangible assets comprised 88.8% of total assets.

Other Stocks to Consider

Some other top-ranked stocks in the broader technology space are Arista Networks ANET, Perion Network PERI and Pegasystems PEGA, each presently sporting a Zacks Rank #1.

The Zacks Consensus Estimate for Arista Networks 2023 earnings is pegged at $5.79 per share, rising 11.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 14.2%.

Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 14.2%. Shares of ANET have increased 22.9% in the past year.

The Zacks Consensus Estimate for Perion’s 2023 earnings is pegged at $2.69 per share, rising 16% in the past 60 days. The long-term earnings growth rate is anticipated to be 25%.

Perion’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 31.7%. Shares of PERI have increased 76.4% in the past year.

The Zacks Consensus Estimate for Pegasystems 2023 earnings is pegged at $1.31 per share, rising 111.3% in the past 60 days.

Pegasystems earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average surprise being 11.2%. Shares of the company have declined 40% in the past year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Perion Network Ltd (PERI) : Free Stock Analysis Report

Pegasystems Inc. (PEGA) : Free Stock Analysis Report

Aspen Technology, Inc. (AZPN) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

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