Industrial software company PTC's (NASDAQ: PTC) stock has dipped recently, and investors, initially at least, reacted negatively to the company's fiscal second-quarter earnings, which it released at the start of May. Is the trend likely to continue, or is now an excellent time to pick up stock in an exciting growth company?

Investors usually pencil in assumptions for medium-term growth based on management's targets, and PTC's shareholders are no different. So when CEO Neil Barua (appointed in mid-February) told investors the business's most crucial metric would only grow by low double digits over the medium term, they grew concerned.

Management's previous medium-term guidance for its annual run rate (ARR) was mid-teens growth, and it can't be good news that the number is shrinking. PTC defines its ARR as "the annualized value of our portfolio of active subscription software, cloud, SaaS, and support contracts as of the end of the reporting period." Growing ARR is the key to generating long-term value and growing free cash flow (FCF).

Continue reading

Source Fool.com