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Down 7.5%: Is the Altium share price a buy?

The Altium Limited (ASX: ALU) share price is down 7.5% today, is it a buy after reporting its half-year result?

Firstly, I think it’s important to keep things in perspective. The Altium share price is still up by 15% this year. Indeed, it was at this share price only a couple of weeks ago, so I’d say the Altium share price has just dropped back to a more realistic short-term share price.

Altium HY20 numbers

Altium reported that its revenue (excluding interest) rose by 195 to US$92.8 million. Board and Systems revenue increased by 12% to US$65.4 million, within that Chinese revenue grew by 27% to US$12.5 million.

NEXUS revenue jumped 197% to US$7 million, TASKING revenue grew 15% to US$9.7 million and Octopart revenue only increased by 2% to US$9 million. Octopart suffered from reduced volume in the parts distribution industry due to excess inventory, which resulted in lower cost per click and lower traffic to distributors.

Altium Designer seats sold was up 19% to 4,205 with total subscribers up 16% to 46,693.

Including the impact of the AASB16 Leases, Altium’s earnings before interest, tax, depreciation and amortisation (EBITDA) margin rose from last year’s revised 38.8% to 39.7%. Altium’s EBITDA increased by 22% to US$36.8 million.

Profit before income tax increased by 23% to US$31.8 million. Profit after tax fell by 2% because of the increase in the effective tax rate to 27%.

Altium has recently released Altium Designer 20 which has a range of new capabilities targeting advanced design and complex projects. It has also released its new cloud platform, Altium 365, and is moving early customers onto the platform.

Altium balance sheet and dividend

The Altium Board decided to declare a dividend of AU$0.20 per share, an increase of 25% compared to last year.

Cash and cash equivalents rose by 39% to US$80.6 million as the company’s balance sheet continues to swell.

Is the Altium share price a buy?

Management warned that due to the emerging uncertainty of the impact of the coronavirus in China and the slow start for Octopart, it’s likely to end at the lower end of its full year guidance of revenue being between US$205 million to US$215 million and the EBITDA margin to be between 39% to 40%, which would still be a solid result.

Altium is a great business, however, I’d rather buy more shares closer to $30 than $40. It has a very exciting future, but the share price is just a bit too hot for me at the moment.

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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. 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.

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