Shareholders of PTC would probably like to forget the past six months even happened. The stock dropped 26.7% and now trades at $122.35. This might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for PTC? Find out in our full research report, it’s free.
Why Are We Positive on PTC?
Originally known as Parametric Technology Corporation until its 2013 rebranding, PTC (NASDAQ: PTC) provides software that helps manufacturers design, develop, and service physical products through digital solutions for CAD, PLM, ALM, and SLM.
1. Billings Surge, Boosting Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
PTC’s billings punched in at $838 million in Q1, and over the last four quarters, its year-on-year growth averaged 21%. This performance was impressive, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. 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.
PTC’s gross margin is one of the best 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 84.7% gross margin over the last year. Said differently, roughly $84.71 was left to spend on selling, marketing, and R&D for every $100 in revenue.
The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. PTC has seen gross margins improve by 4.9 percentage points over the last 2 years, which is elite in the software space.
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.
PTC has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 38.7%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Final Judgment
These are just a few reasons PTC is a rock-solid business worth owning. With the recent decline, the stock trades at 5.5× forward price-to-sales (or $122.35 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 PTC
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
