Altium Limited (ASX: ALU) shares have rocketed higher in the last few years, but is it now the right time to buy?
Background on Altium
Altium is an American, Australian-domiciled software group that designs software for circuit board printing. The group has global operations spanning the United States (US), Australia, China, Europe and Japan.
In the last 5 years, Altium's operations and earnings have exploded and the company's share price is up 1,184.36% since February 2015.
Altium is part of the "WAAAX" group of tech stocks alongside WiseTech Global Ltd (ASX: WTC), Afterpay Ltd (ASX: APT), Appen Ltd (ASX: APX) and Xero Ltd (ASX: XRO).
The Aussie tech group is set to report its half-year results next week and we could see Altium shares move significantly.
Is it the right time to buy?
While early investors in Altium would have seen some significant capital gains, it's not always good news with these tech stocks.
The Nearmap Ltd (ASX: NEA) share price crashed 30% lower last month after a disappointing growth update. Even WiseTech shares have been under pressure from short-sellers in recent months.
There's also been growing chatter that many ASX shares could be overvalued right now. That's natural given the S&P/ASX 200 Index (INDEXASX: XJO) has been surging from record high to record high.
However, Altium shares are trading at a price-to-earnings (P/E) multiple of 69.3 times. That means for every dollar you receive from the share, you're paying $69.30.
Growth shares are a little different and P/E multiples aren't always the best metric. Much of Altium's value is tied up in the expectation of future returns rather than immediate earnings.
However, if we see a slip-up in Monday's results, expect investors to sell out of Altium shares quickly.
Foolish takeaway
It's hard to tell what is overvalued with these ASX tech shares as they continue to outperform.
I personally like Afterpay but I think Altium shares could be climbing higher if Monday's results are strong.
