Altium Limited’s (ASX:ALU) announced its latest earnings update in June 2018, which confirmed that the company experienced a strong tailwind, leading to a double-digit earnings growth of 34%. Below, I’ve laid out key numbers on how market analysts predict Altium’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for this coming year seems optimistic, with earnings increasing by a robust 34%. This growth seems to continue into the following year with rates reaching double digit 68% compared to today’s earnings, and finally hitting US$75m by 2022.
Although it’s helpful to understand the growth rate year by year relative to today’s figure, it may be more insightful evaluating the rate at which the company is rising or falling on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Altium’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 20%. This means that, we can presume Altium will grow its earnings by 20% every year for the next couple of years.
For Altium, there are three essential factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is ALU worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ALU is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALU? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.