If for some miraculous reason $5,000 landed in my bank account, I'd look closely at investing in Altium Limited (ASX: ALU).
The company has had a killer run since announcing its half-year earnings February 18, with the Altium share price rocketing 20.1% to a $33.91 close on Friday. In early trade on Monday, the Altium share price has lifted a further 0.87% to sit near its 52-week high.
Why Altium?
Altium Limited is a world leader in the creation of design software for printed circuit boards (PCBs). Its flagship product is Altium Designer, where engineers are presented with a single interface to monitor the design process of PCBs from concept to realisation. This has done wonders for the productivity and production capacity for realising electronic products, keeping it's 39,179 subscribers very happy.
The company is banking on the growth of the Internet-of-Things (IoT), a market predicted to double to $520 billion by 2021. More specifically, Altium expedites the creation of PCBs, which is a fundamental piece of hardware that mechanically supports and powers ALL electronics. With the exponential growth in AI and IoT to date with tonnes of rocket fuel to burn, Altium is only just getting started.
In its HY results, Altium reminded us all that it is operating debt-free. In fact, it has expanded cash on hand by 11% to $58 million since FY 2018. This puts the company in a good spot to invest in enhancing business systems and next-generation marketing, as well as doubling down on scaling in the US and China over the next few years. With this, an aspirational target of 100,000 subscribers by 2025 seems entirely attainable.
Foolish Takeaway
Altium's HY result was a stand out by far. From the prior corresponding period, it grew revenue by 26% to US$78 million and net profit after tax by a whopping 58% to US$23.4 million. This was driven primarily from strong growth from China which comprised of 24% of the HY revenue.
The company is committed to ensuring its EBITDA margin remains at 35% or better. Management also made a statement on Altium's aspirational growth targets, announcing its confidence in the company being able to achieve $US200 million revenue by 2020 and $500 million by 2025.
It's trading on a 96.06 P/E ratio, showing investors are keen to get into this one. It's nearing its peer WiseTech Global Ltd (ASX: WTC), which is trading at 138x, making it one of the world's most expensive tech companies.
As Altium has a strong track record of beating investor performance expectations, I have confidence that the management team will be able to hit its targets. On top of this, it's a profitable company that has been delivering strong returns for its investors for the last few years.
Altium is a top-quality growth stock that I'd buy if I had $5,000 right now.
