Shares of electronics design software developer, Altium Limited (ASX: ALU), soared 5% today, reaching an all-time high of $5.15 per share.
Up an incredible 122% in the past year alone, investors have clearly become enthusiastic about Altium's investment case which includes strong U.S. dollar exposure, a huge cash balance, scalability of operations and a hefty dividend yield of 3.2%.
With an expanding product range to suit all manner of customers, sticky revenues from subscribers and the prospect of growth in China, Altium is certainly not short of potential. In addition, it'll likely be a beneficiary of the rise of machine-to-machine (M2M) devices.
Its track record of capitalising on its growth potential is also impressive. In America and Europe, revenues have grown at a compound annual rate of 15% in the past three years. Across all regions, the historical compound annual growth rate is 13%.
Has its share price caught up with the potential?
Unfortunately, like every growth stock, there's a chance Altium's share price has gotten ahead of itself. Indeed, Bell Potter analysts recently put a $5.00 price tag on the stock. And according to the Wall Street Journal, the average target price set by analysts is $4.68. The stock currently trades on a price-earnings ratio of 34 times forecast profits for 2015. This compares with technology minnow, Netcomm Wireless Ltd, (ASX: NTC) which has a forecast PE of 78, or GBST Holdings Limited's (ASX: GBT) PE of 33 and Infomedia Ltd's (ASX: IFM) PE of 28.
