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As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Altium Limited (ASX:ALU), it is a financially-robust company with an impressive history and a excellent future outlook. Below, I've touched on some key aspects you should know on a high level. If you're interested in understanding beyond my broad commentary, take a look at the report on Altium here.
Flawless balance sheet with outstanding track record
ALU is an attractive stock for growth-seeking investors, with an expected earnings growth of 20% in the upcoming year. Earnings growth is paired with an eye-catching top-line trajectory of 55%, which indicates a high-quality bottom-line expansion, as opposed to those driven simple by unsustainable cost-cutting activities. ALU delivered a bottom-line expansion of 39% in the prior year, with its most recent earnings level surpassing its average level over the last five years. This illustrates a strong track record, leading to a satisfying return on equity of 28%. which is an optimistic signal for the future.
ALU's strong financial health means that all of its upcoming liability payments are able to be met by its current cash and short-term investment holdings. This indicates that ALU has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health. ALU currently has no debt on its balance sheet. It has only utilized funding from its equity capital to run the business, which is rather impressive for a AU$4.2b market cap company. Investors’ risk associated with debt is virtually non-existent and the company has plenty of headroom to grow debt in the future, should the need arise.
For Altium, I've compiled three fundamental aspects you should further examine:
- 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.
- Dividend Income vs Capital Gains: Does ALU return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from ALU as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of ALU? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.