The Altium Limited (ASX: ALU) share price is down 2.6% so far today, is it now a buy?
In-fact, it's an ugly day for most of the leading technology shares on the ASX. Appen Ltd (ASX: APX) is down 4.5%, WiseTech Global Ltd (ASX: WTC) is down 3.8%, Xero Limited (ASX: XRO) is down 2.1% and Afterpay Touch Group Ltd (ASX: APT) is down 4.7%.
Perhaps it's a sign of investor support that Altium is one of the least down.
Whilst all of these growth shares have compelling futures, I'd argue that Altium is the one trading at the best value. Although it's trading at 43x FY19's estimated earnings, it may be a fairly reasonable price considering the long-term growth it is predicting.
In FY18 alone it generated revenue growth of 26%, earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 35% and earnings per share (EPS) growth of 33%.
If Altium can deliver on the 100,000 Altium Designer subscribers before 2025 then it could an excellent growth share, even at this seemingly-elevated price. Businesses that are growing at a much faster pace than the market deserve a premium, although you need to decide how much of a premium is good value or not
Short-term shareholders are likely suffering from a fall of almost 20% since the start of October, however longer-term holders have done extremely well.
I believe Altium could become one of the next blue chips over the coming years, as long as no competition brings out a better product.
Foolish takeaway
Wise advice these days says it's best to hold onto your winners, particularly when you think of the taxation costs of selling and switching. Good investment returns generally boil down to a few shares that outperform strongly. Altium could be one of those picks.
At above $22 I don't think Altium is a clear buy, unless you plan on holding for at least three years. I'd like to add more Altium shares to my portfolio at $20.50 or under in the present conditions. I may get an opportunity to do so before next reporting season – perhaps the next Fed rate rise will create that opportunity?
