Although the Aristocrat Leisure Limited (ASX: ALL) share price has gone gangbusters this year and gained 34%, I believe a recent dip has created a buying opportunity for investors.
Here are three reasons why I would consider an investment in the gaming solutions company today:
Strong business performance.
When it comes to growth shares on the Australian share market, I believe Aristocrat Leisure would have to be up there as one of the best right now. After all, during the first-half of FY 2017 Aristocrat delivered a massive 49% lift in net profit after tax and before amortisation of acquired intangibles (NPATA) to $272.9 million. While the strong Australian dollar and the company's increased investment in design and development may put a dampener on its second-half result, I feel confident the company will still hit the high-end of its NPATA growth guidance range of 20% and 30%.
Future pipeline to fuel its growth.
A key driver of the strong first-half result was its digital segment. Segment profit increased 53.3% to $77.7 million due largely to the sustained popularity of its Heart of Vegas game and the successful launch of Cashman Casino. The popularity of these games led to an 11.6% increase in daily active users to 1.4 million and a 22.5% jump in average revenue per average daily user to 49 U.S. cents. I expect these numbers to increase in FY 2018 thanks to a strong pipeline of new releases.
Its shares are reasonably priced.
The Aristocrat Leisure share price has tumbled around 8% in the last month. I believe this is due to concerns over the impact the strong Australian dollar will have on its results. But as I believe this strengthening is only temporary and expect the local currency to weaken considerably over the next 12 months, I feel now could be a great time to invest on this share price weakness. At present Aristocrat Leisure's shares are changing hands at approximately 26x annualised earnings, which I believe is reasonably fair given its current growth profile.
All in all, I believe these reasons make Aristocrat Leisure a great buy and hold investment option and a superior investment to rival Ainsworth Game Technology Limited (ASX: AGI).
