As one of the WAAAX ASX growth shares, Altium Limited (ASX: ALU) already has something of a reputation as an ASX high-flyer.
But after already banking a share price rise of nearly 15% in 2020 so far (even after yesterday’s dip), how much further does Altium have to run? And (more importantly perhaps), could Altium be a millionaire-maker ASX share?
How rich has Altium already made ASX investors?
Well, if you bought Altium shares before January 2019, the answer is…. very.
If you had bought into Altium in December 2018, you would have roughly doubled your money by today – so a $500,000 investment in Altium would make you a millionaire today (I was top of my maths class at school).
If you had bought exactly five years ago when the Altium share price was $3.05, you’d be looking at millionaire status if you had invested around $100,000.
And had you bought Altium shares in 2012 (around the time the apocalypse was supposed to happen) for just under 20 cents per share, then it would have only taken a ~$5,000 investment to be worth the million-mark today (are you crying? I know I am).
What about Altium’s future?
Altium is a company that’s still growing at a hefty rate – an essential ingredient to a higher share price in the future. The company is still predicting it will be at the point of bringing in US$500 million in revenue by 2025. This is roughly triple what it cashed in 2019, which in turn was a 23% increase on 2018’s revenue numbers.
If these growth rates keep up, Altium will be on track to make its own balance sheet very rich before too long (if you can call revenues of over US$100 million not rich).
But what about Altium’s investors? A problem for anyone who wants to join this army is the fact that a lot of this future growth has already been priced into Altium shares. On current prices, Altium is being priced at around 65x each dollar of earnings (its P/E ratio). That’s over triple the market average for ASX companies.
This P/E ratio will need to hold over the next few years (which, at 65, is far from guaranteed) if Altium stock is to make its shareholders significantly richer.
For me at least, Altium is a fantastic company at a not-so-fantastic price. I’m not convinced it will continue to be a millionaire-maker for anyone buying in at the current level. Stories like Altium’s prove the value of finding hidden gems before everyone else does!
The post Could Altium be a millionaire-maker ASX share? appeared first on Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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.
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