Australia markets close in 4 hours 17 minutes

Altium shares are up more than 1000% in 5 years. Should you buy?

Kenneth Hall
technology graphic

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.

The post Altium shares are up more than 1000% in 5 years. Should you buy? appeared first on Motley Fool Australia.

Here are 3 more ASX dividend shares that I'll be watching in February.

The Motley Fool AU Announces Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- The Motley Fool Australia's resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 126%) and Collins Food (up 79%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

More reading

Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and WiseTech Global. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia owns shares of Altium, Appen Ltd, and Xero. 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020