Autodesk (ADSK) stock has risen at a compound annual growth rate of 27.7% in the last five years. In comparison, the SPDR S&P 500 (SPY) has risen at an annual rate of 8.8%, while the Power Shares QQQ ETF (QQQ) has gained 15.7% annually in the last five years. Autodesk stock generated returns of 25% in 2016, ~42% in 2017, and 16% in 2018. The stock has gained ~36% this year despite the recent pullback in May, where Autodesk stock has fallen over 2%.
Autodesk sales and earnings have declined between 2014 and 2018. The company returned to earnings and revenue growth in fiscal 2019. So will the stock move higher? Is it currently undervalued?
Autodesk has a forward PE multiple of 36.3x. In comparison, Autodesk’s EPS are expected to rise by an impressive 180% in fiscal 2019. The stock’s estimated five-year PEG ratio stands at 0.7x. If a stock has a PEG ratio below one, it suggests that the stock is undervalued. These metrics suggest that Autodesk stock is grossly undervalued and has significant upside potential.
What does Wall Street think?
Of the 23 analysts tracking Autodesk, 19 recommend a “buy,” three recommend a “hold,” and one recommends a “sell.” Their average 12-month price target of $183.52 implies that Autodesk stock is trading at a discount of 5% to average estimates.