A product’s lifecycle is a long and complicated process.

Manufacturers have to manage a product from its introduction to its decline. And with thousands of products manufactured and distributed each day, manufacturers need proper tools to effectively manage lifecycles.

This is where PTC (PTC) comes in. It’s a SaaS firm that specializes in CAD and PLM software for discrete manufacturers across multiple industries.

Since CAD and PLM are expensive to switch out, PTC’s software products are sticky and are able to generate recurring revenues for the firm.

Yet despite being a mission-critical company, investors underestimate just how profitable the company is.

Investor Essentials Daily:
Thursday News-based Update
Powered by Valens Research

Discrete manufacturers churn out hundreds of thousands of products daily. While consumers simply buy the products they want and need, extensive work ensures those products reach their hands.

The creation, manufacture, and distribution of products is a long and complicated process, necessitating product lifecycle management (“PLM”) software to enable manufacturers to track and manage unit production.

Another critical aspect is the design phase. Designers need computer-aided design (“CAD”) software to create, modify, and optimize product designs.

With millions of products needing management daily, discrete companies require reliable PLM and CAD software.

This is where PTC (PTC) comes in.

PTC was a pioneer in CAD modeling and PLM software, with both becoming the key drivers of the company’s growth throughout the eighties and the nineties.

Since then, the company has transitioned to a Software as a Service (“SaaS”) firm, offering its product portfolio through a subscription-based model.

The company began its transition into a SaaS company in 2019 following its acquisition of Onshape, a CAD SaaS firm.

PTC’s transition to SaaS transformed it from a mere software company into a business with sticky offerings able to generate annual recurring revenue.

PTC currently has a wide range of products and solutions that cater to various industries such as aerospace, energy, retail, automotive, electronics, industrials, and many more.

Its notable offerings include Kepware, a portfolio of industrial connectivity solutions for manufacturing operations, ThingWorx, which caters to Industrial Internet of Things (“IIOT”) applications, Windchill, its flagship PLM offering for manufacturers, Creo, a 3D CAD system for manufacturers, and Codebeamer, an Application Lifecycle Management (“ALM”) platform for product and software development.

PTC has also leveraged recent advancements in AI in its Creo and Windchill offerings.

The firm’s solutions are mission-critical to manufacturers. Swapping out CAD and PLM software is prohibitively expensive because migration could lead to a variety of complications such as data loss, workflow disruptions, and additional training.

Since the company’s pivot to SaaS, revenues have more than doubled from $1.2 billion in 2019 to $2.8 billion in 2025.

However, despite PTC’s continuous improvement in recent years and its status as a mission-critical firm, investors continue to doubt its ability to generate returns.

The company’s as-reported return on assets (“ROA”) has grown from 3% in 2019 to 10% last year. While returns improved steadily during this period, it was well below the 12% corporate average.

On the flipside, Uniform Accounting highlights just how much this company has improved since embracing a SaaS model.

PTC’s Uniform ROA has grown from 15% in 2019 to 53% last year. Not only is PTC far more profitable than most investors realize, it has also made greater strides in improving its returns than the market gives it credit for.

Investors relying on as-reported financials are unable to see how much PTC’s business has improved in recent years. The market still believes this is a below-average business.

This oversight could present an interesting opportunity for investors who understand this company’s true profitability.

PTC is poised to keep growing in years to come, as its business model and recurring revenue model position it to continue generating strong returns.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research