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Aristocrat Leisure Limited shares hit an all-time high: Are they still in the buy zone?

This morning Aristocrat Leisure Limited (ASX: ALL) released a presentation to the market ahead of its investor day in Sydney today.

Although there was nothing market sensitive within the presentation, it still appears to have gone down well with investors judging by its share price gain.

At the time of writing the gaming technology company’s shares are up almost 2% to an all-time high of $27.33.

Is the Aristocrat Leisure Limited share price in the buy zone?

I think it is. While the company elected to not release a trading update or guidance with today’s presentation, I remain confident that FY 2018 will be another huge success.

Thanks to the strong growth of its digital segment, its market-leading position in the pokie machine industry, and recent earnings accretive acquisitions, I expect Aristocrat Leisure will deliver similarly strong growth to what was exhibited in FY 2017.

In FY 2017 Aristocrat Leisure delivered revenue of $2,453.8 million and net profit after tax of $495.1 million. This was a 15.3% and 41.3% increase, respectively, on FY 2016’s result.

Based on the assumption that the company achieves earnings per share of $1.10 this year, up 30% on the prior corresponding period, its shares are changing hands at under 25x estimated forward earnings.

While this is a premium to the market average, I think this is great value for its current growth profile. Especially when you consider the significant growth opportunities the company has in the digital segment.

Goldman Sachs estimates that the Strategy/RPG/Casual (SRC) game segment, which the recent acquisitions of Big Fish and Plarium give the company exposure to, has an addressable market of approximately US$22 billion per annum at present.

This is over 5x the size of the lucrative Social Casino segment, which itself is expected to grow by 14% per annum through to FY 2020.

Overall, with such powerful tailwinds supporting its digital business and complementing the solid growth of its core pokie machine business, I think Aristocrat Leisure is arguably one of the best growth shares on the market right now alongside the likes of A2 Milk Company Ltd (ASX: A2M) and Appen Ltd (ASX: APX).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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