There is no such thing as a ‘perfect’ business, but Altium Limited (ASX: ALU) could be one of the best growth shares to own on the ASX.
As a reminder, it’s an electronic PCB software design business that allows engineers to create the vehicles, items and services of the future.
It sounds futuristic and it’s helped many of the world’s leading industries develop things for the future. Some of the businesses and organisations it’s working with are: NASA, Space X, Tesla, Cochlear Limited (ASX: COH), Apple, Google, Amazon, Qualcomm, Broadcom, CSIRO, Microsoft, Boeing, Lockheed Martin, BMW, John Deere, Toyota, Disney and many more.
Can you think of an ASX company with a more impressive client list than that?
Altium’s customer base shows that it is positioned for technological change in the world.
Here are some of the other reasons Altium is a great ASX growth share:
Geographically diversified earnings – Revenue is comprised of 48% Americas, 32% Europe, 14% Emerging Markets and 7% Asia Pacific.
Aiming for global market leadership by 2020 – Altium wants to be the world leader by 2020 whilst also expanding into other similar technological areas.
Growing profit margins – Altium believes that its earnings before interest, tax, depreciation and amortisation (EBITDA) margin could reach at least 40% over the next six years if it achieves its goals. Its EBITDA margin has only just passed 35%.
Debt free – This is a particularly important point at this stage of the economic cycle. Altium is very well financially placed if a recession does happen.
Altium is focused on returning profit to shareholders – The technology company is committed to growing dividends each year, which is a good way of rewarding long-term shareholders.
There’s no doubt that Altium ticks all the boxes and I think the current share price finally reflects its long-term growth potential. It’s currently trading at more than 47x FY20’s estimated earnings with an unfranked dividend yield of 0.9%.
I think Altium could still be a large market-beater over the next decade at the current price assuming it delivers on its targets, but it’s certainly not cheap, so I would only start with a small parcel at today’s price.
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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Cochlear Ltd. 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 Scott Phillips.