The Altium Limited (ASX: ALU) share price could be a good one to think about right now.
Altium is a high quality business that provides software tools for the design process of the latest technology and items.
In February 2021, Altium reported its FY21 half-year result. It included a continuing operating revenue decline of 4% to US$80 million, expense growth of 3% to US$53 million, a 15% decline of earnings before interest, tax, depreciation and amortisation (EBITDA) to US$27 million and profit before tax fell 23% to US$20.7 million.
Altium said that the decline reflects the economic slowdown caused by extreme COVID-19 conditions in the US and Europe, and a challenging environment, post-COVID in China, for license compliance activities.
The CEO of Altium, Aram Mirkazemi, gave some thoughts about the rest of FY21:
While there is emerging optimism as COVID-19 vaccines are rolling out, we continue to view fiscal 2021 as a pre-vaccine year for our flight path to 2025. Therefore, in weighing stronger execution momentum expected for the second half with lingering macroeconomic uncertainty, our full year revenue guidance is at the lower end of the range, from US$190 million to US$195 million (ex-TASKING) and EBITDA margin in the range of 37% to 39%.
3 reasons why the Altium share price could be a buy
Financial strength and goals
Over the long-term, Altium is aiming to dominate and transform its industry. It's looking to achieve US$500 million of annual revenue and have 100,000 subscribers over the next four or so years.
Despite the difficult operating conditions, Altium is still in a strong financial position. At the end of the half-year it had US$88.3 million of cash and is still debt free. It doesn't capitalise its research and development expenditure. It still generated US$16.6 million of profit after tax and US$18.7 million of group operating cash flow.
It wasn't as though it was all negative either – Octopart revenue grew strongly, rising 19% to US$10.8 million as electronic manufacturing rebounded during the half.
Altium 365
In the HY21 result, Altium 365 was a particularly bright spot and it carries a lot of the company's hopes for the future with its cloud model and collaboration tools for engineers.
At the end of December 2020, Altium said it had 9,300 active monthly users and 4,400 monthly active accounts (up 83% and 69% respectively since July).
Mr Mirkazemi said:
Altium 365 is key to our future success through indirect monetization from our CAD software tools and, in time, direct monetization from the broader ecosystem. I am most heartened by the strong adoption of Altium 365 and, with our Netflix organisational changes behind us, I am confident of a much stronger second half. Early signs are positive for this.
Lower Altium share price
Just like any investment, the value of a potential idea is important. Since 21 October 2020, the Altium share price has fallen by around 33%. That means that the long-term value on offer from Altium shares could be better than most of the last six months.
According to Commsec, the Altium share price is valued at 43x FY23's estimated earnings.
