Industrial software company PTC and positioning tech company Trimble have significantly outperformed the S&P 500 over the past decade. I believe they could do this again over the next decade or two.
Both of these companies have greater growth opportunity through boosting their revenues from higher-margin software and recurring incoming. Let’s look at how they can create long-term value for their investors.
The case for PTC is based on the idea that the digital movement of the industrial sector will keep going over the next decade. Its core services include CAD and product lifecycle software, while its growth offerings include IoT and augmented reality software.
Demand for CAD and product lifecycle management is supported by their move to the cloud as a software-as-a-service. Not only does this change increase long-term revenues, but it also allows it to be easier for customers to collaborate on their work over the cloud.
Along with this, PTC’s IoT and AR offerings have a long growth runway ahead. For example, with IoT software connecting an owner’s physical assets to the digital world, this allows owners to create masses of data which is then digitally changed and analyzed to help the performance of the asset.
One example might be the modeling or functioning of a turbine so the manufacturers can increase performance and better predict when it has to be serviced. Meanwhile, AR allows technicians to fix equipment without even being there physically. For example, it can digitally help a worker looking at the wiring on bottling machinery inside a plant.
For all these reasons, PTC has an excellent future ahead of it.
Positioning technology company Trimble makes hardware and software that aids users in positioning, watching, and modeling their assets. For example, its normal market is geospatial area, but it is also used to monitor trucking fleets, solve problem points in construction, or guide machinery.
The company has three crucial drivers to future growth:
- Expanding its position in new growth markets, like precision construction.
- Changing its revenue to higher-margin software and recurring income.
- Becoming an important part of its clients’ “integrated work process.”
All three are connected and also increase by the data analytics explosion going on now. For example, data analytics created by automated positioning tech will make it easier for a farmer to find a crop and then seed, water, and harvest it. Because of this, the farmer will more likely invest in tech.
The move to more analytics implies more recurring services and software revenue growth. As for getting into the “integrated work process,” investors can think of how 99% of the top 200 trucking companies use Trimble’s tech. Real-time data is used from the fleet to plan routes to maximize productivity.
Wall Street expects Trimble’s earnings to increase by double digits over the medium term, and the long-term looks excellent.
Author: Scott Dowdy