First Read Dassault Systèmes: Q2 26: In-line. $2bn ArisGlobal acquisition made

Research evidence excerpt

First Read Dassault Systèmes: Q2 26: In-line. $2bn ArisGlobal acquisition made

Forecast returns

Forecast price appreciation 9.8%

Forecast dividend yield 1.7%

Forecast stock return 11.5%

Market return assumption 7.9%

Forecast excess return 3.6%

Company Description

France's Dassault is the leading vendor globally of computer-aided design (CAD) and product

lifecycle management (PLM) software. Traditional markets are automotive (24%) and

aerospace (13%), although Dassault has sought to branch into new markets, such as CPG

and life sciences, with the latter augmented by the cUS$5bn acquisition of Medidata in

October 2019, making it the second-largest market at 23% of sales. Europe (38%) and the

Americas (40%) are Dassault's main markets. Competitors include Siemens, PTC and

Autodesk. The Dassault Foundation owns 41% of the shares. Previous CFO Pascal Daloz

became CEO in 2023.

Valuation Method and Risk Statement

Investing in the enterprise software market entails above average risk given low sales visibility,

operational gearing and a tendency for a substantial proportion of sales to be generated at

the end of an accounting period. There is also inherent technology risk. Dassault is heavily

exposed to end demand in industrial markets. Dassault is acquisitive and roughly half of the

FCF generated in the last decade has been used on acquisitions, bringing price, integration

and execution risks. Its largest acquisition, Medidata, cost €5bn in 2019. Competitors include

niche providers such as PTC and Autodesk, but also large groups such as Siemens and Oracle.

The "Dassault Foundation" continues to own a controlling stake in the group. Our price

target is based on a blended approach with reference to a 2025E EV/NOPAT, EV/Sales multiple

and FCF target multiple.