Growth Focus: Altium Limited

by Patrick Taylor

Date of Data Capture: 02/12/2015
Classification:Software Developer
Current Price: $4.96
Market Capitalisation: $644M
Forecast EPS Growth: 18%
Gross Yield: 3.7%
Consensus Price Target: $5.05
# Covering Analysts: 6
Discount at Current Price: 2%
Price Target Trend: Increasing Flat
Signal Time Frame: Long (Monthly)
Trend Bias: Up Flat (Monthly) (Weekly)

Short-term:Positive Neutral
Medium-term: Positive Neutral
Long-term: Positive

Recommendation: Buy
Set up Notes:
·        ALU has been in consolidation since May 2015 and is now working against resistance at $5.00.
·        Longer-term momentum is the key timeframe here with excellent correlation.
·        There could be a bit of turbulence getting through overhead resistance but will represent good support once broken.
·        Some structural resistance remains at $5.31 but should also act as a technical target from here.
  Growth Focus: Altium Limited (ALU)
Our primary focus here is capital gain and we will select our stocks from the ASX top 500 All Ordinaries Index.
To understand greater movements and longer-term trends you sometimes have to take a step back in order to separate the wood from the trees. That is what we are doing here and with a wider and longer time-framed focus we have our eye on Altium ltd, a developer of specialty software for the telecommunications, automotive, aerospace, defense, medicine, science and consumer electronics industries.
Altium has been running well over the last few years and while its current long-term rally has been a picture of measured aggression, it has unfolded in a structured fashion and we think there should be more to come. Just because a stock is near its highs, or making new highs, doesn’t mean that it is expensive, rather it means that it is strong. That’s fine, we like strong companies and we don’t mind paying for that strength – it’s almost always worth the price.
The chart of ALU reveals a trading history that would probably make a great opera, with plenty of excitement, tears and joy, echoing extreme highs and lows. Coming on to the market during the exaggerated exuberance of the tech boom Altium shot from $2 in mid-1999 to a peak of $6.14 early 2000. From there we saw a precipitous fall to 20c in 2005, a rally through to $1.26 in 2007 and back down to 8c in 2011. Since then we have seen gritted teeth turn into smiles as it climbed steadily back to be retesting $5 resistance right now, with its old high in sight above $6.
Altium tends to stay ahead of forecasts when it runs, though is currently pricing at a small discount to consensus targets. Fundamental support is strong with uniformly positive views from the 6 covering brokers and forecast growth looks steady and robust. With a positive long-term trend unfolding, with the last major structural resistance level directly overhead and with a favourable fundamental audience paying attention we think Altium represents an excellent higher-risk growth prospect.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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