Daily Stock Pick for June 1, 2023

There’s a saying in the market – even good stocks can be bad investments if bought at the wrong time (just think about buying tech stocks at the height of the 2021 bubble).

But this also means that even not-so-good stocks can be good investments if you buy them at the right time.

And that brings us to today’s daily stock pick – a company that just saw its stock take a 25% dive after reporting disappointing earnings.

Normally, that would be cause to avoid this stock. But when I take a look under the hood, I’m seeing a company with solid growth fundamentals – that is now trading at an attractive valuation thanks to its recent price plunge.

Aspen Technology, Inc. (AZPN)

Aspen Technology is a leading company in the niche of asset optimization software. This is software that can help companies in highly capital-intensive industries – such as those in energy, chemicals, power transmission, mining, and construction – to optimize their operations and improve asset efficiency.

While this is an industry that is largely “unknown” to the public, it’s a very valuable one – one that is estimated to be worth over $21 billion in 2023 and hit over $47 billion in 2030.

Aspen’s stock took a massive hit at the end of April after its latest quarterly earnings report revealed earnings that came in significantly below consensus. Actual earnings-per-share amounted to $1.06, compared to the consensus of $1.66.

With that drop, Aspen is now trading at a forward price-to-earnings ratio of about 26.5x. I find this to be an attractive entry point considering:

  • Aspen recently merged with Emerson Electric, substantially widening its asset base and increasing its long-term growth potential
  • The solid growth of the asset management optimization market
  • The ongoing shift toward green energy – an industry that will need many of the solutions Aspen is offering

All in, I think this is a solid time to take a position in Aspen. Just don’t expect this to be a “fast” play though – expect to hold this one for a while.

To your wealth,
Felix @ Ace of Investing