Should You Buy Altium Limited At This Share Price?

What to do with ALU shares?

In a market defying move, the Aussie market broke out of the gloomy performances of the European and the US markets. The Aussie market followed the broad trend of the Asian markets, and with the help of a soft RBA, the market reacted positively to a rate on hold.

Altium Limited [ASX:ALU] ALU is an enterprise-software producer. What attracted me to the company is its performance in recent years. Altium’s ability to grow subscribers and expand its sales has been directly responsible for its growing share price.

ALU has a diversified portfolio geographically, mainly in the US and Europe. There is also a reasonably sized business in Asia, including China.

The company’s return is split between software and hardware. Both have been growing.

What’s going to determine the company’s return is its expansion strategy through partnership, licensing and market penetration.

In terms of the macro environment, the IMF and World Bank believe 2015 will be the bottom for most growths.

2016 will be the turning point, which means things are going to be better in most economies, including the US, Europe and Asia.

ALU is not a fast price gainer, but it has been on a stable path in the last few years due to persistent expansion.

Revenue growth rate has been at double digits. It has an expanding profit margin. Even if it does get trimmed somewhat, it still has a very fat margin in place.

ROE has evidently been explosive. This is not likely to continue at the same rate, but there is no denying that the company is in a growth phase.

ALU is not terribly leveraged. It also has plenty of cash coverage on obligations. It pays a dividend and it is not expensive, coming at only 4.72 for P/E.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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