Is Altium the perfect ASX growth share?

Is Altium Limited (ASX:ALU) the perfect ASX growth share?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There is no such thing as a 'perfect' business, but Altium Limited (ASX: ALU) could be one of the best growth shares to own on the ASX.

As a reminder, it's an electronic PCB software design business that allows engineers to create the vehicles, items and services of the future.

It sounds futuristic and it's helped many of the world's leading industries develop things for the future. Some of the businesses and organisations it's working with are: NASA, Space X, Tesla, Cochlear Limited (ASX: COH), Apple, Google, Amazon, Qualcomm, Broadcom, CSIRO, Microsoft, Boeing, Lockheed Martin, BMW, John Deere, Toyota, Disney and many more.

Can you think of an ASX company with a more impressive client list than that?

Altium's customer base shows that it is positioned for technological change in the world.

Here are some of the other reasons Altium is a great ASX growth share:

Geographically diversified earnings – Revenue is comprised of 48% Americas, 32% Europe, 14% Emerging Markets and 7% Asia Pacific.

Aiming for global market leadership by 2020 – Altium wants to be the world leader by 2020 whilst also expanding into other similar technological areas.

Growing profit margins – Altium believes that its earnings before interest, tax, depreciation and amortisation (EBITDA) margin could reach at least 40% over the next six years if it achieves its goals. Its EBITDA margin has only just passed 35%.

Debt free – This is a particularly important point at this stage of the economic cycle. Altium is very well financially placed if a recession does happen.

Altium is focused on returning profit to shareholders – The technology company is committed to growing dividends each year, which is a good way of rewarding long-term shareholders.

Foolish takeaway

There's no doubt that Altium ticks all the boxes and I think the current share price finally reflects its long-term growth potential. It's currently trading at more than 47x FY20's estimated earnings with an unfranked dividend yield of 0.9%.

I think Altium could still be a large market-beater over the next decade at the current price assuming it delivers on its targets, but it's certainly not cheap, so I would only start with a small parcel at today's price.

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Growth Shares

happy investor, share price rise, increase, up
Growth Shares

2 top ASX growth shares for explosive potential in 2025

These stocks look exciting and compelling to me.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Share Market News

Brokers say these ASX 200 growth stocks could rise 50% to 70%

Analysts think these shares could be dirt cheap and destined to generate big returns.

Read more »

happy investor, share price rise, increase, up
Growth Shares

3 fantastic ASX 200 growth shares to buy in 2025

Analysts have good things to say about these buy-rated shares.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Growth Shares

The ASX 200 stock with 'a $200 billion gross profit opportunity'

Experts believe this stock has excellent potential.

Read more »

A young girl and boy drinking milk in a garden setting
Growth Shares

2 ASX growth shares set to skyrocket in the next 12 months

These stocks have a lot of potential according to experts.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Growth Shares

2 no-brainer ASX 200 shares to consider buying with just $1,000

Analysts rate these top stocks very highly. Let's find out why.

Read more »

A happy laughing surfer couple surfing together.
Growth Shares

If I were in my 20s, I'd buy these ASX shares for growth

I think these investments could be great picks for younger Aussies.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Growth Shares

Invest $5,000 into these ASX 200 shares in 2025

Analysts think these shares could be top options for an investment in 2025.

Read more »