Although the Altium Limited (ASX: ALU) share price has failed to follow the market higher today, it is still up significantly this year.
Since the start of the year the design software company's shares have risen a massive 70%, making them one of the best performers on the local market.
Why is the Altium share price smashing the market?
Altium's shares have been on fire this year due to its impressive first half performance and its positive long-term outlook.
In the first half of FY 2019 Altium recorded a 26% increase in half year revenue to US$78 million.
This strong top line growth was driven largely by the increasing demand for its software across the globe which led to a 34% increase in Altium Designer new seats and a 9% lift in its overall subscription pool to 39,179.
And thanks to margin improvements due largely to the benefits of scale, Altium's profits grew at an even quicker rate. For the six months ended December 31, Altium posted a 58% increase in profit after tax to $23.4 million.
The good news for investors is that management appears to believe that this strong growth can continue.
It advised that it was "very confident" it would achieve its 2020 target of revenue of US$200 million and an EBITDA margin of at least 35%.
Looking further ahead, management provided a long-term "aspirational" revenue target which will see the company attempt to increase its revenue to US$500 million by 2025.
Which means that if it achieves an EBITDA margin of 35%, it will be generating US$175 million of EBITDA that year. That's a significant increase from where it stands today and goes some way to explaining why its shares have been in such high demand.
Is it too late to invest?
Due to the quality of its software, its massive market opportunity, and talented management team, I think there's a strong chance that Altium will achieve its aspirational target.
In light of this, even though its shares look expensive now, I believe it has all the hallmarks of being a fantastic buy and hold investment along with fellow tech stars Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO).
