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Aristocrat Leisure Limited, Crown Resorts Ltd, Jumbo Interactive Ltd: Which gambling stock should you buy?

While there would be no shortage of fortunes which have been lost to gambling there’s also a fair share of fortunes which have been created thanks to gambling endeavours.

The ASX is home to a number of gaming companies which offer investors the opportunity to gain exposure to what is by and large a very profitable industry for most of the corporate players in the sector.

Here are three that could be worthwhile taking a closer look at…

Poker machine maker Aristocrat Leisure Limited’s (ASX: ALL) share price is at a multi-year high with the stock gaining 34% in the past year. The share price gains have no doubt been helped along by the recent US-based acquisition of VGT, a company that will triple the size of its US business.

While the growth profile for the group continues to impress, some investors may be put off by the relatively high multiple the stock trades on. This multiple could arguably be justified however, given growth expectations.

In contrast to Aristocrat’s rallying share price, casino owner and operator Crown Resorts Ltd (ASX: CWN) share price is currently crawling along at a 52-week low.

For value investors the fall in share price may have created an appealing entry point into a company which remains the leading casino group in Australia while also offering exposure to overseas casino operations as well.

Like Crown, shareholders in online lotteries software provider Jumbo Interactive Ltd (ASX: JIN) are experiencing the pain of a stock which is trading near its 52-week low. While the market obviously appears to have concerns over the near term outlook for Jumbo, the long-term tailwind of higher online sales of lottery tickets – currently just 1% of the $250 billion in global lottery sales are conducted online – appears sound.

Unlike its gambling sector peers Aristocrat and Crown which have market capitalisations of $4.2 billion and $10.3 billion respectively, Jumbo is a small, under-the-radar stock with a market capitalisation of just $49.6 million. In FY 2014, Jumbo achieved a net profit after tax of $2.8 million on revenues of $24.1 million. With the group’s operations going live in Germany recently, Jumbo now has exposure to a significantly larger potential customer base.

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

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