Is the Altium Limited (ASX: ALU) share price a buy after the electronic PCB software business gave investors a business update yesterday?

Here’s what Altium revealed

Altium said that since the last market update in early April, it’s anticipating some headwinds due to coronavirus impacts in the US and Western Europe.

May and June are typically the strongest months of the year for closing sales. So it’s going to cause problems for Altium’s FY20 result with the cash preservation priorities of small and medium size businesses affecting Altium’s sales. But Altium did say that engineers are still working on prototype designs. The electronics industry is still holding up relatively well.

In response to the problem, Altium has launched ‘attractive pricing’ and extended payment terms to drive volume. That’s not beneficial for revenue, margins or cashflow in the short-term. But I think it makes sense for the longer-term. Altium’s plan is to become the clear market leader by 2025, what happens in FY20 and even FY21 is less important than continuing to grow long-term market share.

The Altium share price fell almost 4% yesterday.

Altium is working even harder on rolling out its new cloud platform Altium 365 so that more clients will adopt to working on the platform. Altium 365 Standard was made available to all subscribers on 1 May 2020. According to management, it’s “off to a great start”. It won’t drive short-term revenue, but it’s important for transforming the industry and improving the recurring revenue.

The company said it’s still profitable and has a cash balance of more than US$77 million.

Due to the disruptions, the goal of US$200 million revenue this year is unlikely to be met.

Is the Altium share price a buy?

At around $35 the Altium share price is looking a little expensive for the short-term considering yesterday’s news. There could be heavier economic impacts to come this year. Though the very low interest rate does supposedly boost asset values.

Over the long-term I think investors will still do quite well at $35, but I’d rather buy at around $30. It’d be even better to buy for price much cheaper than $30, but we don’t know what the Altium share price is going to do.

More reading

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Motley Fool contributor Tristan Harrison owns shares of Altium. 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.

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Over the last 10 years the healthcare sector has been a great place to invest your money.

During this time the S&P/ASX 200 Health Care index has climbed a remarkable 413%.

While I don’t necessarily expect the same level of gains over the next 10 years, I believe the tailwinds the sector is experiencing are likely to underpin further outperformance in the future.

In light of this, I think it is well worth having exposure to the sector in your investment portfolio.

But which shares should you buy? Two healthcare shares I think could generate strong returns for investors in the future are listed below:

Nanosonics Ltd (ASX: NAN)

Nanosonics is an infection control specialist which I believe could be a great long-term investment. This is thanks to the impending launch of several new products targeting unmet needs and its core trophon EPR product. The latter product is used by healthcare organisations to prevent ultrasound probe cross-infection.

At the end of the first half, the trophon EPR product’s global installed base had grown 17% over the last 12 months to 22,500 units. While this is a large number, it is still only a fraction of its total addressable market which is estimated to be 120,000 units. Due to its best in class status, I expect more market share gains over the coming years. This should support strong sales growth from units and also recurring revenue growth from the consumables the device requires. And if its new product launches are a success, the sky could be the limit for Nanosonics.

Ramsay Health Care Limited (ASX: RHC)

Ramsay Health Care is a leading private hospital operator. It provides healthcare services from 480 facilities across 11 countries. This makes it one of the largest and most diverse private healthcare companies in the world.

While times have been hard for its network over the last couple of years and this is unlikely to ease in the immediate term, I believe its long term outlook is very positive given the increasing demand for healthcare services globally. In light of this, I think it is worth focusing on the long term and considering a patient buy and hold investment in its shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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.

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The Commonwealth Bank of Australia (ASX: CBA) share price will be one to watch today after the release of its third quarter update.

How did Commonwealth Bank perform in the third quarter?

For the three months ended March 31, Australia’s largest bank delivered an unaudited statutory net profit of approximately $1.3 billion.

The bank’s cash net profit from continuing operations also came in at approximately $1.3 billion during the quarter. This was a 41% reduction on the average quarterly cash net profit it achieved in the first half and driven by remediation charges and COVID-19 provisions. In respect to the latter, Commonwealth Bank has made an additional credit provision of $1.5 billion for the potential longer term impacts of COVID-19.

Positively, the bank’s operating income was flat for the period. Management notes that its strong operational execution is driving core volume growth, offset by the impacts of a lower cash rate. Operating expenses (excluding notable items) was down 1%, reflecting seasonal factors and ongoing simplification savings.

This ultimately led to Commonwealth Bank finishing the period with a strong CET1 capital ratio of 10.7%. This includes the payment of its interim dividend on March 31 and the COVID-19 provision.

Strength and resilience on display.

The bank’s chief executive officer, Matt Comyn, believes this result demonstrated the strength and resilience of the bank.

He said: “The strength and resilience of the Bank remained evident through the March quarter. Our people have continued to serve our customers diligently and professionally under challenging circumstances.”

The chief executive also believes the bank is well-placed to navigate the current crisis and support consumers and businesses.

He commented: “The strength of the Bank means we are well placed to support our customers and the broader Australian economy. Since the onset of the COVID-19 pandemic, our package of support measures has included over $9 billion in support to ~100,000 businesses, repayment deferrals on approximately 240,000 loans, reduced interest rates for borrowers, increased interest rates for depositors and waived fees and charges.”

“Our strong capital position enabled us to deliver 1H20 dividend payments totalling $3.5bn to our ~830,000 shareholders during March, providing a further direct cash benefit into the economy,” he added.

Asset sale.

In addition to its update, Commonwealth Bank revealed that it has entered into an agreement to sell a 55% interest in Colonial First State to private equity firm KKR.

The transaction implies a total valuation of $3.3 billion, which will result in CBA receiving cash proceeds of approximately $1.7 billion from KKR. The sale price represents a multiple of 15.5x pro forma net profit after tax of approximately $200 million.

The two parties intend to undertake a significant investment program, strengthening the position of Colonial First State as one of Australia’s leading retail superannuation and investments businesses.

Management notes that the transaction represents the final stage of its previously announced planned exits from various wealth management activities over recent years.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• 3 ways to pay off your mortgage faster
• Meet the growing ASX large cap that’s beating the COVID-19 slowdown
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• ASX 200 sinks 1.3%: Big four banks drag ASX lower & Altium issues sales warning

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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