Is the party over for the Altium Limited share price?

Credit: Printed Circuit Corporation.

What: The share price of software developer Altium Limited (ASX: ALU) has fallen 7% today after the group released its interim profit results.

The share price fall does however need to be kept in the context of the stock’s meteoric rise which has seen a gain of nearly 70% over the past 12 months.

For comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is down around 16% over the same time frame.

Here’s what Altium reported for the six months ending December 31:

  • Revenue rose 13% to US$42.5 million
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 6% to US$10.6 million
  • The group’s underlying EBITDA margin increased to 27.5%
  • Earnings before interest and tax gained 1% to $9.7 million
  • Net profit after tax (NPAT) jumped 35% to US$9.1 million thanks to a low income tax expense

Now what: Altium noted that it remains on track to achieve its revenue goal of $100 million by financial year 2017 and that it expects to be able to expand operating margins to over 30%.

Altium, like other listed software companies such as XERO FPO NZ (ASX: XRO) and Technology One Limited (ASX: TNE), certainly has a positive growth outlook and an appealing business model.

However, with the information technology sector enjoying significant investor support in recent times it’s important to remain focussed on valuation as some share prices may arguably have run well ahead of themselves.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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