HY Report: Why The Altium (ASX:ALU) Share Price Could Go Nuts Tomorrow

The Altium Limited (ASX: ALU) share price could be one to watch tomorrow after it reported its half-year report after the market closed.

Altium is an Australian multinational software business that was founded in 1985. It now has offices globally in places like San Diego, New York, Boston, Munich, Shanghai, Tokyo and Sydney. Its software focuses on electronics design systems for 3D PCB design and embedded system development. Its services include Altium Designer, Altium Vault, CircuitStudio, CircuitMaker, TASKING and Octopart.

Altium’s Half Year Report

Revenue increased by 24% to US$78.5 million, Altium Designer software licenses and subscription revenue grew by 26% and 11% respectively. There were particularly strong growth figures from Octopart search advertising, TASKING software licenses and Altium Nexus licenses, which were up 80%, 50% and 51% respectively. On a country basis, Chinese revenue went up 49%.

Altium’s operating expenses only grew by 12%, resulting in the EBITDA increasing by 49% to US$28.36 million (click here to learn what EBITDA means). The EBITDA margin achieved was 36.3%, beating the company’s previous goal of 35% quite comfortably.

Net profit after tax (NPAT) grew by 58% to US$23.44 million and earnings per share (EPS) increased by 57% to US18 cents. Operating cash flow increased by 80% to US$26.8 million.

According to Bell Potter, the consensus was for profit to be around US$19.6 million, so Altium has materially beaten those high expectations. This may cause the share price to rise a fair bit tomorrow.

Altium Dividend and Balance Sheet

Altium ended the half year with US$58 million of cash on the balance sheet. The company says cash management is important for the Altium business model whilst returning a meaningful dividend to shareholders.

Altium decided to increase the dividend by 23% to AU 16 cents per share from 13 cents a year ago.

Altium Management Comments

Altium CEO Aram Mirkazemi said: “Altium is focused on achieving PCB market leadership by 2020 and market dominance by 2025. We are picking up a gear with our transactional sales organisation to enable us to scale to 100,000 subscribers through a number of initiatives, including further systematization and greater account-based intelligence.

We expect our subscriber growth to accelerate post 2020 once the impact of these initiatives comes into effect.”

Is Altium a buy?

This result is certainly impressive and Altium has managed to beat market expectations yet again. It certainly wasn’t priced cheaply at the close of trading today and it’s likely to get even more expensive when the market opens tomorrow.

Altium is proving to be a very good technology business for shareholders and it continues to predict good things over the next six years and beyond. Altium has set a new target of US$500 million in 2025.

Over the long term Altium may very well be a good buy when the market opens, but it might be a good idea to remain patient to wait for a more attractive entry price – only a couple of months ago it was trading at under $21. More volatility could create an attractive entry price.

Altium is a really good growth share, but the ASX businesses in the FREE REPORT below could be better value compared to Altium when the market opens tomorrow.

2 ASX Shares Better Value Than Altium?

Disclosure: At the time of publishing Jaz owns shares of Altium, but that could change at any time. 

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