Does Altium Limited’s (ASX:ALU) 21.97% Earnings Growth Reflect The Long-Term Trend?
Examining how Altium Limited (ASX:ALU) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Altium is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its software industry peers. View our latest analysis for Altium
Commentary On ALU’s Past Performance
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to assess many different companies in a uniform manner using the latest information. For Altium, its most recent earnings (trailing twelve month) is $28.1M, which, in comparison to last year’s level, has jumped up by 21.97%. Since these figures may be somewhat myopic, I have determined an annualized five-year value for Altium’s net income, which stands at $22.0M. This suggests that, generally, Altium has been able to gradually raise its net income over the past few years as well.
What’s enabled this growth? Well, let’s take a look at whether it is merely owing to industry tailwinds, or if Altium has seen some company-specific growth. Over the past couple of years, Altium grew its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 15.42% in the previous twelve months, and 12.47% over the past five. This shows that whatever tailwind the industry is enjoying, Altium is capable of leveraging this to its advantage.
What does this mean?
Though Altium’s past data is helpful, it is only one aspect of my investment thesis. While Altium has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Altium to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for ALU’s future growth? Take a look at our free research report of analyst consensus for ALU’s outlook.
2. Financial Health: Is ALU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.
