While shareholders of Altair Engineering (NASDAQ:ALTR) are in the black over 5 years, those who bought a week ago aren't so fortunate

While Altair Engineering Inc. (NASDAQ:ALTR) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 21% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 123% in that time. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 44% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 4.2%, let's check if the fundamentals match the share price.

See our latest analysis for Altair Engineering

Altair Engineering wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

For the last half decade, Altair Engineering can boast revenue growth at a rate of 10% per year. That's a fairly respectable growth rate. We'd argue this growth has been reflected in the share price which has climbed at a rate of 17% per year over in that time. Given that the business has made good progress on the top line, it would be worth taking a look at the growth trend. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Altair Engineering in this interactive graph of future profit estimates.

A Different Perspective

We regret to report that Altair Engineering shareholders are down 44% for the year. Unfortunately, that's worse than the broader market decline of 25%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 17%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Altair Engineering may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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