A punt on Aristocrat

Whilst the Aussie dollar seems to have settled itself at around the US92c mark, economists are divided as to whether the falls are over or whether they could fall further. Regardless, at today’s value, the Aussie has fallen around 13% since its high of US$1.06, giving companies with overseas operations plenty to smile about.

One such company is Aristocrat Leisure (ASX: ALL) – a manufacturer and distributor of gaming machines – which receives 47% of its revenue from selling pokies machines in the US. According to Mark Wilson, an analyst for Deutsche Bank, for each cent that the dollar falls compared to the US currency, Aristocrat’s revenues could increase by up to $1 million.

Impressive odds

The company impressed investors late in May with the release of its half-year results, where its net profit after tax (NPAT) had increased by 11.2% to $52.6 million – which was largely attributed to strong international performance and consumer confidence. Meanwhile, CEO Jamie Odell has promised that double-digit profit growth will be maintained throughout this period to ensure as strong a performance as the first half.

Whilst it has been impressing in overseas markets, its domestic performance is also pleasing. Despite strong competition from companies such as Ainsworth Game Technology (ASX: AGI), Tabcorp (ASX: TAH) and Tatts Group (ASX: TTS), Aristocrat managed to slightly increase its share in Australia last period and maintained its number one market share position across the Asia Pacific.

Worth the punt?

Along with its aggressive strategy to take further market share, the company has also been focused on returning debt to a more sustainable level which, in turn, also allows for lower operational costs. In the first half of 2013, the company decreased its net debt by a total of $55.6 million, reducing interest and marketing costs.

A company focused on the long-term in a growing industry is definitely enough to spark an interest from investors.

Foolish takeaway

Currently trading at $4.24 per share on a P/E ratio of 24, the market is expecting big things from Aristocrat. Whilst its prospects are certainly intriguing, any setbacks on the share price may make it worth taking that punt.

On the other hand, if you’d prefer more established companies, The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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