Phase Space AI

Valuation

PTC Inc [PTC]

PTC Inc [PTC] — Valuation

As of 2026-07-30 · spot $136.29 · Company state: A (mature-stable), with a declared instrument caveat

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1. Base figures

TTM FCF margin is strongly positive, so the interim-FCF correction is conservative in direction; --fcf-margin 0.3167 was passed explicitly rather than omitted. FY2026 guided FCF (~$850m on ~$2,720m revenue = 31.3%) confirms the forward margin is the same sign and roughly the same size, so no trailing-vs-forward sign inversion of the GOOGL type applies here.

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2. Terminal margin — 34.0%

Basis: PTC's own FY2026 guidance, reconciled through the opex bridge. Not the trailing actual.

Why not the trailing actual

TTM operating margin is 37.81% and FY2025 was 35.86%. Both are contaminated, and the contamination is measurable:

A 20.8pp spread across four consecutive quarters of the same business, in a year with no restructuring and no acquisition. The cause is stated by the company: on-premise subscription licence revenue is recognised upfront, so contract duration and renewal timing move reported margin directly. The TTM window happens to contain the Sep-25 quarter at 48.5%.

The brief warns that a terminal margin below the trailing actual is almost certainly an error. Here is why it is not: the trailing actual is not a margin, it is a phase of a recognition cycle, and the TTM window's composition is an accident of which four quarters you stand in. Setting terminal at 37.81% would be extrapolating the Sep-25 cohort forever.

The guidance-derived bridge (FY2026)

Terminal margin 34.0%. Constraint satisfied: m_EBIT,T 34.0% ≤ m_gross,T 83.8%.

FY2025 opex bridge from 10-K lines, for the reconciliation the brief requires

Ties to the filed OperatingIncomeLoss of $982,385,000 exactly, and to OperatingExpenses of $1,311,858,000.

steady_state_check.py --ticker PTC --terminal-margin 0.34 --exit-multiple 16.0 --wacc 0.095

MARGIN RAMP
  2020-09-30 margin      14.5%
  latest margin          35.9%
  moved                 +21.4pp   latest is window peak: True
  terminal assumed       34.0%   (-1.9pp vs latest, -1.9pp vs peak)

RETURNS AND THE WARRANTED MULTIPLE
  ROIC measured                                  14.4%
  warranted multiple at steady ROIC              9.6x
  SCALING CONTAMINATION                          1.00x
  terminal reinvestment rate implied by g/ROIC  20.8%
  exit multiple used vs steady-state warranted   1.66x

FINDINGS
  • MARGIN_STILL_RAMPING: operating margin moved +21.4pp over 2020-09-30 to 2025-09-30 and the
    latest value IS the window peak. A terminal margin set at the latest actual is a ramp endpoint
    extrapolated, not an observed plateau.
  • EXIT_MULTIPLE_UNWARRANTED_AT_STEADY_STATE: 16.0x is 1.7x the 9.6x warranted at a 14%
    steady-state ROIC.

What it flagged, and the response:

• MARGIN_STILL_RAMPING — flagged, and it is correct, and this memo does not set terminal at the latest actual. The check is doing exactly what it was built to do. The FY2025 35.86% is the 20-year peak and the terminal is set 1.9pp below it, from guidance rather than from the peak. Had the screen's 35.9% been carried forward, this flag would have been the whole finding.
• EXIT_MULTIPLE_UNWARRANTED_AT_STEADY_STATE — at 14.4% measured ROIC, g = 3%, WACC = 9.5%, the identity warrants 9.6x EV/EBIT. Any multiple used above that assumes today's returns persist. PTC's ROIC is materially better than PRGS's (14.4% vs 7.3%) and above WACC, so the gap is 1.66x rather than 2.20x — but it is a gap.
• Terminal reinvestment implied by g/ROIC is 20.8% of NOPAT. PTC's actual capex is ~$30m/yr on ~$880m of operating cash flow (3.4%), with the balance going to buybacks and tuck-in M&A. The implied 20.8% is broadly consistent with a company that funds tuck-ins and returns the rest — no reinvestment-gap flag fires.

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3. The trailing EV/EBIT anchor is UNIDENTIFIED, and here is the arithmetic

PTC's EV/EBIT sits at the 2.6th percentile of its own 6-year history and the 6.0th percentile of the post-2024 window. That looks like a deep-value signal. It is not.

The multiple collapsed because the denominator nearly doubled, not because the price fell. Enterprise value is roughly flat over the window. A percentile computed on a series whose denominator underwent a step change is not measuring multiple movement — it is measuring the step change, which is precisely the defect own_multiple_history.py was written to avoid.

The post-2024 EV/EBIT deciles confirm the series is bimodal: [15.9, 20.3, 31.0, 33.2, 35.4, 39.4, 40.8, 43.5, 46.7]. There is a 10.7x gap between the 20th and 30th percentile. A distribution with a hole in the middle is two distributions.

Therefore: the EV/EBIT anchor is declared UNIDENTIFIED for the 12-month target, per criteria.md ("If history is too short or spans a regime change, declare UNIDENTIFIED rather than substituting a peer median"). No peer median is substituted. EV/Sales is used instead, where the denominator is continuous.

EV/EBIT is still used for the implied-path test, because there the multiple is an input held fixed and sensitised, not an anchor read off history.

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4. Regime-overlap check

Daily series from Alpaca split-adjusted closes, 2020-07-27 → 2026-07-29, n = 1,509; current share count and net debt held fixed; TTM revenue lagged 60 days to filing availability.

EV/Sales overlaps at 85.1% — the series is regime-continuous and admissible. This is the opposite of the ZS finding (12.7%) and the opposite of PRGS's EV/Sales (32.2%). PTC's multiple has not re-based; its earnings have.

Current EV/Sales 5.69x sits at the 5.7th percentile of the post-2024 window and the 2.5th percentile of the full six years. Window-B deciles: [6.06, 7.27, 8.36, 8.88, 9.52, 9.79, 9.96, 10.18, 10.45] — today is below the 10th percentile of the entire window.

One qualification, stated rather than hidden: the historic EV/Sales series includes Kepware and ThingWorx revenue, which have been divested. The revenue denominator therefore falls slightly going forward relative to history, which mechanically raises the forward multiple at a constant price. This makes the 5.7th-percentile reading modestly less cheap than it appears. The divested ARR is not separately quantified by PTC, so the adjustment cannot be sized — recorded as a known bias in the conservative direction of the anchor.

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5. Implied-path test (primary output)

reverse_dcf.py --spot 136.29 --shares 115.505791 --net-cash -1071.861 --revenue 2953.972 --terminal-margin 0.34 --exit-multiple 15.05 --fcf-margin 0.3167 --wacc 0.095

THE MARKET REQUIRES: revenue CAGR of 5.6% Held fixed: terminal margin 34.0%, exit multiple 15.05x EV/EBIT, WACC 9.5%, 5 years.

Required vs demonstrated — four bases, and they disagree in sign

The honest number is +3.65pp, on constant-currency ARR excluding divested businesses — that is the metric management guides on, it is the metric that is ASC-606-neutral, and it is the only one that describes the ongoing business. But the memo records all four, because the spread between +6.7pp and −6.6pp is 13.3pp and it is entirely definitional.

Verdict: PASS WITH ARGUMENT. The argument is specific and evidenced: constant-currency ARR ex-divested is guided at +9% to +9.5% and printed +9.1% in Q3, above the required 5.6%; free cash flow is $935m TTM and ~$950m normalised; gross margin is 83.8% and stable. It is not a plain PASS, because on the two measures that are not adjusted for the divestiture — as-reported ARR (flat) and guided revenue (−1%) — the price requires more than the business is delivering.

Sensitivity over the exit multiple

Flip point ~11.8x EV/EBIT. Applied to normalised EBIT of $921m rather than the TTM $1,117m, the flip point in price terms is roughly $121 — about 11% below spot. That is a genuinely tighter buffer than the headline +6.7pp screen margin implies.

Terminal value exceeds 60% of EV, so the reverse DCF is the primary output and the forward DCF is supporting evidence, per criteria.md.

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6. Twelve-month target — EV/Sales, own history, percentile stated

Anchor: EV/Sales, because the EV/EBIT anchor is UNIDENTIFIED (§3) and EV/Sales overlaps 85.1% across the regime break (§4).

Forward 12-month revenue

FY2026 guidance midpoint $2,720m. ARR compounds at ~9% constant currency and revenue converges on ARR over time; PTC's revenue is now ex-Kepware/ThingWorx for a full year from Q3 FY2027. A forward 12-month revenue of $2,880m (+5.9% on the FY2026 midpoint) is the base — below ARR growth, because FX and contract-duration mix are both headwinds and PTC has just demonstrated that revenue can lag ARR by a wide margin.

Target

12-month target: $133 (−2.7%), at 5.69x EV/Sales = the 5.7th percentile of the 2024–26 own-history window, held flat.

The base assumes no re-rating. That is a deliberate and conservative choice and the reason is stated: criteria.md forbids a base below every stated anchor without argument — this base sits at the current anchor, not below it — and the divested-revenue bias identified in §4 means the historic percentile reads cheaper than the forward reality. A re-rating to even the 20th percentile of the company's own recent range is worth +26%; the memo does not assume it.

The distribution is the finding: −2.7% base, +67% at the median of PTC's own two-and-a-half-year trading range, −21% at its low. PTC is not cheap or expensive on revenue; it is unchanged, while its earnings have doubled and are about to normalise back down.

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7. Share count — a stated uncertainty, not a silent adoption

The last filed cover-page count is 115,505,791 (4 May 2026). On 2026-07-29 the CFO said PTC repurchased "more than two times what we previously targeted" in fiscal Q3. Q3 GAAP net income of $118.780m over $1.03 EPS implies 115.32m diluted for the quarter — an average, so the end-of-period count is lower still. The Q3 10-Q, not yet filed, will carry the exact figure.

115,505,791 is used as an upper bound. Market capitalisation and therefore EV are consequently overstated, and the target per share understated — both in the conservative direction. Per the brief, the discrepancy is reported rather than either number being silently adopted.

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8. Criteria scoring