Aristocrat Leisure Limited (ASX: ALL) could be one of the highest quality businesses on the Australian share market right now.
That's the view of analysts at Wilsons, which are feeling very positive on the ASX 200 share.
What is the broker saying about the ASX 200 share?
Wilsons highlights that Aristocrat has a long track record of strong earnings growth through the cycle. This has been driven by product development, market share gains, recurring revenue, and strong pricing power. It said:
Aristocrat (ALL) is among the highest quality businesses on the ASX. The company's earnings are closely related to the capex/opex of its customers (i.e. casinos), which can be influenced by the macro environment and changes in consumer spending (on gaming).
However, as the leading B2B gaming machine supplier in North America (which represents 80% of its land-based gaming revenues), the business has a long track record of strong earnings growth through the cycle. This growth has been supported by consistent market share gains, a largely recurring revenue profile, its high degree of pricing power, and successful new product development.
Strong performance to continue
The broker was impressed with the ASX 200 share's performance in FY 2024 and believes it will build on this in the current financial year. In fact, it is expecting the company to grow quicker than the industry in FY 2025. It adds:
Aristocrat has continued to strengthen its dominance of the North American land-based gaming operations market. FY24 was a record year of net additions of leased gaming machines for Aristocrat. The company delivered 7,100 net additions, far exceeding its guidance of 6,000, and easily outpacing its competitors – including ASX listed Light & Wonder (LNW). The sequential improvement in net adds in 2H has demonstrated impressive momentum, providing confidence in continued above-system growth in FY25.
R&D to drive growth
Another reason Wilsons is positive on this share is its consistent (and large) investment in R&D. It believes this ensures that its games are the best in the market, which is always good news for its share price. It said:
Aristocrat significantly outspends its peers on R&D, which has underpinned a long track record of successful game launches, allowing it to maintain an industry leading games portfolio.
Aristocrat's games portfolio includes 20 of the top 25 premium leased games and the business the largest share of top new premium leased games, at 38%, which is an indicator of R&D success, future share moves, and pricing. The breadth, popularity, and performance (based on revenue generated for casinos) of Aristocrat's portfolio is unrivalled, which should continue to drive strong demand for its products while supporting market-leading pricing (i.e. fee per day) over the medium-term.
In light of the above, it's no wonder that Wilsons has this ASX 200 share in its Focus Portfolio.
