Should you buy Altium Limited at today's share price?

Altium Limited (ASX:ALU) shares are now up 42% over the past year.

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The Altium Limited (ASX: ALU) reached new highs of $11.67 today leaving investors scrambling to get a hold of the shares.

As the connected world we live in grows more and more complex, so too must the devices that help us manage our daily lives. Being one of the world's largest electronic PCB design software providers, Altium is perfectly positioned to capitalise from an increasing global demand for connected devices and the circuit boards required to produce them.

During the year Altium acquired Toronto-based product design platform Upverter with its entire founding team joining the Altium family.

This highlights a strong commitment to the continued research and development of its product offering. After reporting strong full-year results the group is still anticipating that it could nearly double its revenue to $200 million by 2020.

What are the risks?

As with all technology stocks it is not without risks. Particularly for software providers. The main risk being loss of market share to competitors with a newer or more advanced product. Newcomer accounting software firm XERO FPO NZX (ASX: XRO) taking on the well established Myob Group Ltd (ASX: MYO) is a prime example of this risk. Find out more about these two companies here.

Fortunately, Altium has a model that creates sticky revenue meaning there is a high cost associated in switching platforms for a majority of its customers. In addition, the breadth and depth of Altium's client base extends from one person teams to the likes of Microsoft, NASA and BMW.

These factors in combination with a continued focus on research and development should maintain its position a as dominant provider in the sector for years to come.

Aram Mirkazemi, Altium's Chief Executive stated earlier in the year: "Altium is realistically close to being able to get to a position where it will be for PCB design what Adobe Photoshop is for picture editing."

If this proves to be the case, then I believe the company's growth prospects could easily justify the 35x earnings asking price for long term buy-and-hold investors.

This being said, at today's prices I would wait to see whether a more favourable buying opportunity presents itself.

Motley Fool contributor Tim Wilks owns shares in 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.

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