MENU

Revealed: This could be the best growth share on the ASX

Altium Limited (ASX: ALU) is one of Australia’s largest software businesses with a market capitalisation of $1.1 billion.

The share price has grown an incredible 2,500% over the last five years but there are signs that it is nowhere near done yet. Here are a few reasons why Altium could be the best growth stock on the ASX to own:

Rapidly growing industry

Altium provides electronic PCB software for engineers to design the products of the future. Everyday objects are becoming more complicated and connected such as cars, fridges, phones and computers.

To make these products work we need increasingly advanced software, which is where Altium comes in.

Altium has an impressive array of clients including Microsoft, BMW, Toyota, NASA, Cochlear Limited (ASX: COH) and Lenovo.

Revenue and profit margins

Hopefully all of this increase of Altium’s services translates into a big jump in revenue. Management are predicting that revenue could double by 2020 and keep increasing from there.

The most satisfying companies to own are ones that increase their profit margins as they increase revenue. This makes them more profitable as time goes on, resulting in profits growing quicker than revenues.

In its latest results to 31 December 2016 management reported that the earnings before interest, tax, depreciation and amortisation margin increased from 25% to 25.8%.

Great dividend too

I like any growth stock that rewards shareholders along the way with a growing dividend. Altium has grown its dividend every year since 2012 and in its latest results increased the dividend by 10%.

In fact, the dividend has grown has grown really strongly in this time. In 2012 the half-year payment was $0.05 per share and the latest payment was $0.11. Doubling the dividend in five years is a fantastic result for shareholders who are also looking for income.

Foolish takeaway

Altium is currently trading at 23x FY18’s estimated earnings with an unfranked dividend yield of 2.51%. A patient investor could be rewarded by investing in Altium shares today and holding for the long-term.

Altium isn't the only great growth stock out there, all of these businesses could also smash the market over the next few years.

A Big, Fat, Fully Franked Dividend

This company's dividend is almost the stuff of legends. Since it started paying dividends in 2007, it has increased its payout to shareholders every single year, a run that includes 21 consecutive dividend increases.

Based on the last 12-months of dividends, its shares are currently offering a fully-franked 4.8% yield, which grosses up to almost 7% when those franking credits are included. And in stark contrast to the likes of Commonwealth Bank and Telstra, this company just increased its dividend by over 13%, and guided for 2017 profits to grow by 20%!

Discover the name of this "new breed" of blue chip along with 2 others in our new FREE report "The Motley Fool's Top 3 Blue Chips Stocks For 2017."

Click here to receive your copy.

Motley Fool contributor Tristan Harrison owns shares of Altium. 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.

HOT OFF THE PRESSES: My #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.