Altair Engineering Stock: Why Innovation Will Drive Higher Moves

altair stock
iStock.com/Olivier Le Moal

Altair Engineering Helping to Develop Next Big Breakthrough

Industrial and technology companies are always searching for ways to drive innovation and develop great products. The process is undertaken via internal research and development (R&D) and via third-party solutions provided by technology services companies like Altair Engineering Inc (NASDAQ:ALTR).

ALTR stock debuted with its initial public offering (IPO) at $13.00 in November 2017 and since climbed 170% to a record $37.19 on May 18.

While some of the easy gains may have already been made, Altair Engineering has above-average growth prospects that could drive the stock much higher.

Altair Engineering’s development of stimulation engineering software is in high demand by over 5,000 companies in 24 countries.

The software company focuses on high-growth areas, including solvers and optimization, modeling and visualization, industrial and concept design, the Internet of Things, and high-performance computing.

Altair Engineering stock staged two breakouts on the price chart since its IPO.

Chart courtesy of StockCharts.com

The first major breakout for ALTR stock occurred at $28.00 in late February, followed by a second breakout at around $32.00 in May.

At this point, Altair Engineering stock is pausing after the record move, but could soon take a run at $40.00 and higher.

ALTR Stock Displaying Steady Growth

Altair Engineering’s financial history is limited, but revenues have risen in two consecutive years to a record $333.3 million in 2017.

Year

Revenue ($ Millions)  

Growth

2015

$294.1
2016 $313.2

6.5%

2017

$333.3

6.4%

The revenue growth rate could be higher for ALTR, but the outlook is improving.

For 2018, Altair Engineering is expected to ramp up its revenues 9.6% to $365.3 million, followed by an even better 13.4% to $414.3 million in 2019. (Source: “Altair Engineering Inc. (ALTR),” Yahoo! Finance, last accessed May 24, 2018.)

On the bottom line after adjustments, Altair Engineering is estimated to report flat earnings of $0.26 per diluted share this year but deliver growth of 80.8% to $0.47 per diluted share in 2019.

Altair Engineering’s balance sheet is sound, with about $39.0 million in cash and the company’s free cash flow being positive.

Year

Free Cash Flow ($ Millions) 

Growth

2015

$5.6
2016 $11.9

112.8%

2017

$8.6

-28.2%

Analyst Take

Altair Engineering stock trades at 67 times its high earnings per share (EPS) estimate for 2019 and it has a price/earnings to growth (PEG) ratio of 5.9. This is not cheap by any means, but Altair Engineering is growing its revenues.

My view is that the company will be able to turn in stronger results, driven by the need for companies to innovate and manufacture better products.