3 Big Reasons ADSK Should Be On Your Watchlist

January 24, 2025 at 04:03 AM EST

ADSK Cover Image

Autodesk’s 25.7% return over the past six months has outpaced the S&P 500 by 13.1%, and its stock price has climbed to $300.87 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Following the strength, is ADSK a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why Do Investors Watch ADSK Stock?

Founded in 1982 by John Walker and growing into one of the industry's behemoths, Autodesk (NASDAQ: ADSK) makes computer-aided design (CAD) software for engineering, construction, and architecture companies.

Three Things to Like:

1. Elite Gross Margin Powers Best-In-Class Business Model

Software is eating the world. It’s one of our favorite business models because once you develop the product, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

Autodesk’s gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an elite 92% gross margin over the last year. Said differently, roughly $91.98 was left to spend on selling, marketing, and R&D for every $100 in revenue. Autodesk Trailing 12-Month Gross Margin

2. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Autodesk is extremely efficient at acquiring new customers, and its CAC payback period checked in at 9.1 months this quarter. The company’s rapid sales cycles indicate it has a highly differentiated product offering and a strong brand reputation. These dynamics give Autodesk more resources to pursue new product initiatives while maintaining optionality.

3. Operating Margin Reveals a Well-Run Organization

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.

Autodesk has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 21.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Final Judgment

Autodesk is an interesting business with potential, and with its shares beating the market recently, the stock trades at 9.8× forward price-to-sales (or $300.87 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More Than Autodesk

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.

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