The Altium Limited (ASX: ALU) share price has fallen by 32% over the last six months. Does that mean that it’s now cheap?
It’s a good question. Before COVID-19 came along it seemed like the business was on a path to strong success.
What has been happening to the Altium share price?
Plenty of ASX tech shares are now a lot higher than they used to be. Despite the recent declines, businesses like Xero Limited (ASX: XRO), Afterpay Ltd (ASX: APT) and Temple & Webster Group Ltd (ASX: TPW) are all a lot higher than they were compared to before COVID-19.
However, that’s not the case for Altium. The Altium share price has fallen to $24.50.
There are company-specific problems that Altium is facing.
The issues
Altium has said that it’s facing compliance difficulties in China. The Asian region could be an important earnings driver for the company in the coming years, but only if it can get its clients to properly pay for the services.
Not only that, but the operating environment that Altium is currently working in is much harder because plenty of companies are finding it tough due to COVID-19 impacts as well as those clients keeping a tight hold on their expenditure.
Altium’s client growth has somewhat slowed. It has also divested its TASKING business which has made its longer-term goals harder to achieve without making acquisitions.
Is the Altium share price a cheap opportunity?
Well, it’s not as though Altium shares are cheap as chips yet. Using the CommSec earnings estimates, the Altium share price is valued at 57 times the estimated earnings for the 2021 financial year.
But the company is still trying to become the dominant world leader in the electronic printed circuit board space.
Whilst things are difficult for Altium right now, over the longer-term things should improve back to normal conditions over time. Management are hoping that its cloud offering product called Altium 365 will be able to win over more subscribers over time with the convenient and collaborative service.
The Altium share price is certainly not cheap, but if you believe in Altium’s long-term market opportunity then this low(er) price is obviously a better price to buy shares than before. If the shorter-term outlook wasn’t so clouded then the Altium share price wouldn’t be as low as it is.
The balance sheet remains in a good position, with US$88.3 million in the bank for safety and potential acquisitions.
