Why the Ainsworth Game Technology share price sank 9.5% lower today

The Ainsworth Game Technology Limited (ASX:AGI) share price has been sold off again on Tuesday. Here's why…

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The market may be pushing higher today but the same cannot be said for the Ainsworth Game Technology Limited (ASX: AGI) share price.

The gaming technology company's shares fell as much as 9.5% to 76 cents earlier today. Its shares have since recovered but are still down 4% at the time of writing.

Why did Ainsworth Game Technology's shares sink lower today?

Investors have been heading to the exits after the company released a trading update which revealed that it has been struggling with intense competitive market pressures and delays.

When the company released its half year results at the end of February, management said that it expects "an improved profit performance in H2FY19 compared to the H1FY19 with continuing international momentum and the release of the new products expected to translate to improved financial results."

According to today's update, this will not be the case and its second half trading performance is now expected to be below these expectations.

On a pre-currency basis, profit before tax, excluding one off items, is now expected to be around $4 million for the six months ended June 30. This compares to a profit before tax of $8.9 million in the first half, on a pre-currency basis.

Management explained: "This result has been impacted by intense competitive market pressures and delays encountered in new product approvals which were not achieved in the expected timeframes. These approvals are now being progressively secured and are expected to translate into improved product performance and domestic market share gains in FY20."

Should you invest?

This decline means its shares are changing hands at approximately 15x trailing earnings, which could prove to be decent value if the company is going to return to growth in FY 2020.

However, I would suggest investors wait to see how things go over the next few months before considering an investment.

In the meantime, I would sooner buy the shares of arch rival Aristocrat Leisure Limited (ASX: ALL). I think it is one of the best examples of growth at a reasonable price (GARP) on the Australian share market along with Webjet Limited (ASX: WEB).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet 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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