ALL share price in focus
Founded by Len Ainsworth in 1953, Aristocrat Leisure is an Australian gambling machine operator that is headquartered in Sydney.
Currently, Aristocrat is the largest manufacturer of gambling machines in Australia and one of the world’s leading producers of slot machines. However, the company’s business extends beyond just physical machines; Aristocrat also develops online games, which have grown to contribute nearly half of its total revenue.
Aristocrat’s gaming machines can either be sold outright to venues or gaming operators or installed with a revenue-sharing model, where a portion of the earnings generated is paid back to Aristocrat on a recurring basis.
The key metrics
For investors, ALL’s revenue, gross margin, and profit can provide valuable insights into the company’s performance.
ALL last reported an annual revenue of $6,604m with a compound annual growth rate (CAGR) over the last 3 years of 11.7% per year. While the absolute number is useful to know, the key point is the trend. We want to see a consistent, upward trajectory in revenue.
Gross margin measures profitability before taking into account overhead costs – it reflects the strength of the company’s core business operations. ALL’s latest reported gross margin stood at 58.6%.
Finally, the number we’re most interested in – profit. Last financial year Aristocrat Leisure Ltd reported a profit of $1,303m. Three years ago they made a profit of $820m, representing a CAGR of 16.7%.
Financial health of ALL shares
Profitability is important, but equally important is the capital health of the company. We want to know about the company’s leverage, their capacity to pay debts, and their ability to generate a return on assets. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings.
Aristocrat Leisure Ltd’s net debt currently sits at $1,449m. Higher debt levels can increase sensitivity to interest rate changes and economic cycles.
Another figure we can look at is the debt/equity percentage. This tells us how much debt the company has relative to shareholder equity – this is also known as leverage. ALL has more equity than debt, with a debt/equity ratio of 38.3%.
Finally, we can look at the return on equity (ROE). The ROE tells us how efficiently the company is turning shareholder equity into profit – high numbers indicate the company is generating a lot of value for investors, while a low number raises concerns that capital isn’t necessarily being allocated efficiently. ALL generated an ROE of 20.0% in FY24.
What to make of ALL shares?
With strong revenue growth over the last 3 years, profits trending upwards, and a solid ROE, the ALL share price could be one worth watching in 2025.
Please keep in mind this should only be the beginning of your research. Company quality is one thing, but making sure the valuation is reasonable is another entirely. There are many ways you can try to value a company. If you want to learn more about share price valuation, you can sign up for one of our many free online investing courses.
