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Is this stock the biggest bargain on the ASX?

It has become increasingly difficult over the past 12 months to find quality companies on the ASX trading at a discount to my estimated fair value. However, one company currently stands out as offering great long-term growth and also looks cheap at the current price of $3.73. That company is Ainsworth Game Technology Limited (ASX: AGI).

Ainsworth is an electronics gaming machine manufacturer, and is led by the highly regarded Len Ainsworth who founded the company in 1995 and is currently the Executive Chairman. Mr Ainsworth previously formed Aristocrat Leisure Limited (ASX: ALL) and pioneered many of the major design and technical innovations in gaming machines over the past 50 years.

Ainsworth has performed extremely well in recent times, achieving 10 consecutive periods of revenue growth, with net profit also increasing at double-digit growth rates over the same period. During the first half of FY14, Ainsworth increased net profit before tax by 51% to $45.6m, with sales revenue increasing by 26%.

Ainsworth is one of the top three players within the Australian market and holds key regulatory licenses in Australia. Analysts at Morningstar have stated that Ainsworth’s share of gaming floor product in the two key markets of New South Wales and Queensland has increased from 10% in 2012 to 15% today.

Not only is Ainsworth performing well in Australia, but Ainsworth is growing strongly overseas. International revenue increased by 33% for the half-year ended 31 December 2013 and international revenue now makes up 33% of the company’s total revenue. Impressively, sales in South America increased by a whopping 380% and made up 70% of all international revenue. Furthermore, total gaming machines installed in the Americas increased to over 1,500, up 172% on the previous year and the company recently acquired 24 acres of land in Las Vegas to continue its expansion plans in America.

Ainsworth has a strong balance sheet with little debt and pays out between 40%-60% of profits as dividends. Trading on only 18 times FY13 earnings, Ainsworth is cheap when considering the rate at which the company is growing.

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Motley Fool contributor Bradley Murphy owns shares in Ainsworth Game Technology mentioned in this article.

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