Prediction: PTC Will Soar Over the Next 3 Years. Here's 1 Reason Why.

The market is underestimating the growth potential of industrial and manufacturing software company PTC (NASDAQ: PTC). Simply put, its key metric, namely its annual run rate (ARR), continues to grow at a relatively high single-digit rate in a challenging trading environment. Ultimately, the growth in ARR will translate into free-cash-flow growth and a significant price appreciation for the stock.ARR represents the "annualized value of our portfolio of active subscription software, SaaS, hosting, and support contracts as of the end of the reporting period," according to the company. In other words, it approximates what PTC is invoicing its customers on an annual basis. It's the key to growing PTC's cash flow, with management stating, "Over the mid-term, we expect free cash flow to grow faster than ARR, with non-GAAP operating expenses expected to grow at roughly half the rate of ARR."The good news is that ARR continues to grow at an impressive rate and is on track for 8% to 9% growth at constant currency rates in 2025, and this is coming at a time when benchmark indicators of manufacturing growth, such as the Institute for Supply Management's Purchasing Manager's Index, indicate that the manufacturing sector contracted for 10 of the last 12 months to June. Throw in the uncertainty created by tariffs, and PTC's ARR growth is even more impressive.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool