ALL share price in focus
Founded by Len Ainsworth in 1953, Aristocrat Leisure is an Australian gambling machine operator that is headquartered in Sydney.
Aristocrat is currently the largest machine manufacturer in Australia and one of the largest manufacturers of slot machines around the world. However, that’s just one part of the business. Aristocrat also makes online games. This segment has grown steadily to make up nearly half its total revenue.
Gaming machines can be sold outright to a venue or gaming operator. Alternatively, a machine can be installed with a proportion of the revenue generated being paid on a recurring basis back to Aristocrat.
REA shares
Founded in 1995, REA Group is a Melbourne-based real estate advertising company that is majority-owned by News Corp. In Australia, it’s best known for its Realestate.com.au platform.
REA Group operates on a global scale and now operates property websites in around 10 countries used by some 20,000 agents. In a typical month, the core Australian website gets over 55 million visits. While the business has diversified globally, Australian operations still account for the lion’s share of revenue. Within Australia, REA makes money by listing properties for sale or rent (i.e. the agent uses REA’s website to show properties, which the property owner is on the hook to pay). It also makes money from financial services (e.g. mortgage broking), but this is a much smaller part of the business.
The competitive advantge that REA has is the same as any other established platform: network effects and economies of scale. In other words, Domain (the #2 player) is meaningfully behind REA in users and views, which means REA can continue to control pricing and market dynamics. REA also benefits from owning assets across all parts of real estate, including listing, advertising, mortgage broking, and house sharing.
ALL share price valuation
As a growth company, one way to put a broad estimate on the ALL share price could be to compare its price-to-sales multiple over time. Currently, Aristocrat Leisure Limited shares have a price-sales ratio of 5.68x, compared to its 5-year average of 4.87x, meaning its shares are trading higher than their historical average. This could mean that the share price has increased, or that sales have declined, or both. In the case of ALL, revenue has been growing over the last 3 years. Please keep in mind that context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric.
The REA share price currently trades at a price-sales ratio of 17.17x, which compares to its 5-year long-term average of 17.41x. So, REA shares are trading below their historical average. However, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! Just remember there are many different ways to value a share, like Rea Group Ltd.
