Date of Data Capture: 11/6/2019
Name: ALTIUM LTD (ALU)
Classification: Software & IT Services
Current Price: $32.25
Market Capitalisation: $2.86 B
Forecast EBITDA Growth: 46.78%
Yield Estimate: 1.38%
Consensus Price Target: $32.44
# Covering Analysts: 5
Discount at Current Price: 0.59%
Price Target Trend (3-Month): Up-Flat +1.15%
Signal Timeframe: Monthly-Weekly-Daily
Trend Bias: Up-Flat / Long-Medium
Focus: (Dividend Income) & Capital Growth
Set up Notes:
• Strong running software design company ALU has been moving higher in aggressive cyclical uptrends - with sporadic pullbacks providing entry points - we have that here with the stock underpinned by an equally strong outlook.
• Performance has been excellent with strong growth seen across sales, earnings and profits since 2013, all while increasing margins – this is set to continue with robust forecasts to 2021.
• We are buying into short-term weakness of a strong uptrend, with pricing breaking through linear resistance just days ago as the stock bounced off $30 structural support with good momentum shown across all key timeframes.
Support ($): 30.00, 27.50 & 25.00.
Resistance ($): 35.00 then clear upside.
Growth Focus: ALTIUM LIMITED (ALU)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
The old market truism of ‘buy strength and sell weakness’ means that you have to be prepared to pay up for good quality stocks and even be willing to buy a company as it makes new highs. Ideally you want the strong technical outlook to be matched by an equally robust fundamental growth story, and we think Altium Ltd might just be an opportunity worth chasing as it emerges from a minor consolidation after hitting all-time-highs earlier this year.
The company has 30 years of trading history and have been listed on the ASX since 1999, in that time they have matured into a dominant operator in the printed circuit board (PCB) market with integrated services ranging from CAD technological design, parts administration and cutting edge production. With the company having a declared intent to dominate its field, we see good organic growth being supplemented by an ongoing strategy of acquisition, and seeing that PCBs are integral to internet connectivity, the underlying market is good and is expected to remain so in the medium to long-term.
Altium already boasts an enviable client list including global giants like VW, BMW, Toyota, NASA, Boeing, Dell and Microsoft, but are also looking to build on this position to secure market leadership with excellent growth seen in Asia and especially in China. The company is in robust condition with no debt, increasing cash balance, and generally strong performance across key markets and an expanding subscriber base, with growth focus to remain in Asia and America.
Strong fundamental performance has been a driving force behind the consistent uptrend of the last few years with consistent gains seen across sales, margins and profits, with forecasts predicting more of the same out to 2021.
Analysts are largely in agreement with an overall positive aggregate view, though it does need to be noted that current target pricing sees the stock at a premium to expectations, though these have been rising sharply in line with stronger performance, and we expect analysts to follow the price higher.
Pricing shows a classic step/stair uptrend with regular consolidation breaks over the last two years as underlying profit growth has accelerated, this should continue and if we are right we should see pricing solidify the breakout from linear resistance near $33 last week. There remains important peak-high structural resistance remaining at $35 but with our weekly/medium-term indicator rolling to the upside with strong signal correlation, we expect price to follow market expectations higher, and while we know we are chasing this one – it could be quite a catch.