Is the Altium Limited (ASX: ALU) share price finally in the buy zone today?
The ALU share price has had a stellar 2019 so far and even hit a new all-time high of $38.49 almost two months ago back in early September.
But ever since, the Altium share price has trended slowly lower and is going for $32.83 today at the time of writing – nearly a 15% drop from its high of just 8 weeks ago. Still, even on today's prices, Altium has given its lucky shareholders a 51% YTD gain so far this year.
So, is Altium in the buy zone at its current share price? Lets take a look.
What does Altium do?
Altium is one of the WAAAX stocks – the exclusive ASX club where the 'most exciting' tech stocks on the market reside. Altium gained its WAAAX membership due to its disruptive Altium Design program – subscription-based cloud software that is used in the electrical engineering and design of printed circuit boards (PCBs). PCBs are present in almost every electronic device out there and with new and wacky smart devices and gadgets coming out every year, it's certainly a growth area in my view.
This view is also backed up by Altium's most recent earnings numbers. For FY19, Altium reported year-on-year revenue growth of 22.6% as well as earnings growth of 39.8%, which translates into earnings per share growth of 40.5%.
Is the Altium share price in the buy zone?
On today's share price, Altium is trading at approximately 56 times its earnings, which is well above the current market average of around 18. As you have just seen, Altium is indeed a high growth stock with a promising future, but whether this translates into good value today at 56 times earnings is a decision you will have to make yourself if you are interested in ALU shares.
Me personally, I'm going to be waiting for a dip – you never know when things will turn around and the market will offer you a better deal. Just ask any Wisetech Global Ltd (ASX: WTC) shareholder.
