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What Should Investors Know About The Future Of Altium Limited's (ASX:ALU)?

Simply Wall St

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In December 2018, Altium Limited ( ASX:ALU ) released its earnings update. Generally, analysts seem fairly confident, with earnings expected to grow by 29% in the upcoming year relative to the past 5-year average growth rate of 5.2%. By 2020, we can expect Altium’s bottom line to reach US$48m, a jump from the current trailing-twelve-month of US$37m. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Altium in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here .

Check out our latest analysis for Altium

How will Altium perform in the near future?

The longer term expectations from the 4 analysts of ALU is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ALU's earnings growth over these next few years.

ASX:ALU Past and Future Earnings, June 18th 2019

This results in an annual growth rate of 20% based on the most recent earnings level of US$37m to the final forecast of US$70m by 2022. EPS reaches $0.65 in the final year of forecast compared to the current $0.29 EPS today. Margins are currently sitting at 27%, which is expected to expand to 28% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Altium, there are three pertinent factors you should further research:

  1. Financial Health : Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation : What is Altium 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 Altium is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Altium? Explore our interactive list of stocks with large growth 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 editorial-team@simplywallst.com . 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.