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Bright prospects for Altium Limited

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This week Money asks Roger Montgomery for a hot stock pick - Altium Limited (ASX:ALU)

Key statistics:

29/09/15 closing share price: $4.530 52 week high: $5.310 Most recent dividend: 8c Annual dividend yield: 3.51%

Altium software

Altium Limited (ASX: ALU) is an extremely high quality global software business boasting around 10% market share and growing. Founded in 1985 in Hobart, Australia as Protel Technology, Altium has been developing, creating and selling electronic design tools (software and hardware) that help electronics designers harness the latest devices and technologies, manage their projects across broad design 'ecosystems', and create connected, intelligent designs.

Altium designs software which allows engineers to create plastic circuit boards (the same circuit boards running your computer, mobile phone, tablets etc). It earns revenue through sales of licences to use the software, and annually paid subscriptions for maintenance and updates. Altium electronic design tools are used in a variety of industries by engineers such as aerospace and defence, life sciences, automotive, mobile devices and communications, and research and education.

In its full year result Altium reported revenue, EBITDA & underlying NPAT up 13%, 24% & 38% respectively. Whilst management doesn't provide annual guidance, they reiterated their FY17 target of $100 million in revenue grown organically versus $80.5 million today on higher margins.

This growth should therefore prove highly valuable if it eventuates and at current prices, Altium appears to have bright prospects. We remain holders of the business.

Altium limited

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Roger Montgomery is founder, chairman and chief investment officer of Montgomery Investment Management. Following a successful career as an analyst and public company chairman, Roger published the first edition of his stock market guide, Value.able, in 2010, becoming an Australian best seller in just 16 weeks. He holds a Bachelor of Commerce and is a senior fellow of the Financial Institute of Australasia.
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