On Friday, Altium Limited (ASX: ALU) reported results from the third quarter and its stock enjoyed a swift ride north to $5.00 shortly after.
The result was good but we didn’t note anything above and beyond our expectations for the firm. Yet, the market overall appears to believe that Altium deserves a higher valuation (we’re seeing some believe that the stock is worth $5 a share or more), here at Montgomery we’re comfortable with our $4.00 to $4.50 value range.
Our summarised notes on the firm’s third quarter results are below.
Key points (the firm reports in $US, comparative to third quarter results in 2014):
- Sales up 13 per cent, revenue up 10 per cent and deferred revenue up 24 per cent (note that this looks large but was mostly off the back of prior increases).
- Subscription count is at 27,300 (at the first half of 2015 subscriptions were circa 27,000).
- Renewal rates steady at circa 84 per cent in developed regions and 30 per cent in undeveloped regions. Note that these are up from financial year 2014 results where renewal rates were 81 per cent in developed regions and 23 per cent in undeveloped regions.
Source: ALU Announcements/Documentation, Montgomery estimates
- Europe has done well in terms of growth in local currency, however given the fall in EUR/USD the same growth won’t be reflected in the firm’s financials.
Source: Yahoo Finance
- Management is considering an entry into South Korea and Japan. On the latter, this will put them in direct competition with Zuken (another PCB design software developer).
- Management reiterates their expectation of double digit full year sales and revenue growth.
Source: ALU announcements
The Montgomery Fund and The Montgomery Private Fund hold positions in Altium Limited. This article is for general advice and educational purposes only. Before you commit to any investment decision we strongly recommend you seek the counsel of a licenced investment adviser.