Is the Aristocrat Leisure (ASX:ALL) share price in the buy zone after its results?

The Aristocrat Leisure Limited (ASX:ALL) share price could be going higher from here according to one leading broker…

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The Aristocrat Leisure Limited (ASX: ALL) share price edged higher on Monday.

The gaming technology company’s shares rose 0.1% to $40.70 following the release of its half year results.

How did Aristocrat Leisure perform?

Aristocrat was on form during the first half and delivered a result in line with expectations previously laid out by management.

For the six months ended 31 March, the company reported a normalised net profit after tax (NPAT) of $362.2 million. This is an increase of 18.4% on the prior corresponding period. This normalised result excludes a $1.1 billion deferred tax benefit from a year earlier.

Management advised that Aristocrat’s profit growth was driven by strong performances from both its Gaming and Digital businesses. Positively, almost 80% of its revenue was derived from recurring sources during the period.

What did analysts think of the result?

Analysts at Goldman Sachs were pleased with the result.

They said: “ALL reported normalised 1H21 Sales/EBITA/NPATA which was in line with GSe given the preannounced result. That said, we note that digital continues to deliver better-than-expected results, and was 6%/9% better than GSe across sales/segment profit respectively (we were above consensus on digital). Balance sheet remains robust, with net leverage now down to 1.2x (vs. 1.4x in FY20), and the group notes that it has in excess of A$2 bn of liquidity as at Mar 2021, allowing it to preserve full optionality for additional investments to accelerate its strategy.”

What about the Aristocrat Leisure share price?

Goldman has retained its buy rating and lifted its price target to $42.30. While this may only imply 5% upside (6% including dividends) for the Aristocrat Leisure share price over the next 12 months, it still sees it as a buy.

It explained: “We revise our FY21-23E EBITA by 7% to 3% reflecting: i) better digital trajectory, and ii) improved ANZ outlook. Our 12m TP (EV/EBIT SOTP based, method unchanged) increases to A$42.30 (from A$39.53) and with ~6% TSR; we stay Buy given relative earnings momentum and balance sheet strength/optionality.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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