Any time ALL has fallen by 15% over the past few years, I've taken the opportunity to increase my holding. I bought quite a few parcels 18 months ago at $31.00. In the short term, anything can happen. In the medium to long term, the share price follows EPS. I bought a few more a week ago for $39.80. Am I annoyed...yes. Worried? Not for a second.
We're trading on 18.5x this year's PE and 16.5x 2025's PE with EPS growing at 10% a year. The market leader. Highest spender of R&D in its category. Why would I want to sell, and buy LNW which I consider a challenger / inferior?! I look at companies like REA, Wisetech or CSL (all great companies) and compare the growth rates with ALL, and we seem incredibly cheap in comparison. Even ARB, Breville or the beaten-up Domino's Pizza -- where you're paying 50-100% more for a similar growth rate. I know where I'd rather have my money. It's probably unfair to compare across industries. I'm only illustrating that I see value and safety in ALL below $50 (let alone below $40).
Especially when considering our ROE and past/future (projected) growth. We also have a share buyback plan in place and multiple avenues for future growth with real money gaming, and sports in the US. ALL is probably in a stronger position than it ever has been, despite the LNW challenger emerging. I find it incredible that Aristocrat is trading on a PE in the mid-to-high teens, yet has the some of the strongest financial metrics on the ASX.
We should have our half-yearly report in a couple of weeks' time. Plus a fully franked dividend. I am looking forward to both.
Out of interest, ALL, and LNW have both fallen 16-odd percent from their respective highs in March:
Aristocrat Leisure
It's funny how ALL was storming up from $40 to $47 and I was reading the usual fund managers predicting how it would soon be at $50. They've gone quiet now. My only concern with ALL is a slow-down in growth, but that has shown no signs of happening. I will be continuing to buy if the share price weakness continues.
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