Based on Altium Limited’s (ASX:ALU) earnings update in June 2018, the consensus outlook from analysts appear fairly confident, as a 33% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of 14%. By 2019, we can expect Altium’s bottom line to reach US$50m, a jump from the current trailing-twelve-month US$37m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Altium in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
What can we expect from Altium in the longer term?
The view from 4 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ALU’s earnings growth over these next few years.
From the current net income level of US$37m and the final forecast of US$73m by 2021, the annual rate of growth for ALU’s earnings is 21%. EPS reaches $0.55 in the final year of forecast compared to the current $0.29 EPS today. Earnings growth appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, ALU’s profit margin will have expanded from 27% to 31%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Altium, there are three pertinent aspects 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 Altium 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 Altium is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Altium? 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 firstname.lastname@example.org.