DOW share price in focus
Downer is the leading provider of integrated infrastructure services in Australia and New Zealand. They’re responsible for building, maintaining, and operating transit systems, utilities services, and public infrastructure.
While the name might not be familiar, you’ve definitely come across their work. Downer operate services like the Yarra Trams in Melbourne, and build the passenger trains you see in most states.
Downer separates its business into three main segments of Transport, Utilities, and Facilities. Transport delivers a little over 50% of their revenue, and Utilities and Facilities around 20% and 30% respectively.
Since we consider Downer EDI Ltd to be a blue chip stock, or a mature business, we like to look at things like return on invested capital (ROIC) and revenue growth as signs of sustainability. In FY24, Downer EDI Ltd had an ROIC of 6.90% and revenue has compounded at -1.6% in recent years. If a mature business struggles to consistently hit 10% ROIC it could be a sign the business may not be investing its capital well. This is just a rule of thumb we follow.
ALL shares
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.
DOW share price valuation
One way to have a ‘speedy read’ of where the DOW share price is could be to study something like dividend yield through time. Remember, the dividend yield is effectively the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, Downer EDI Ltd shares have a dividend yield of around 3.09%, compared to its 5-year average of 3.74%. Put simply, DOW shares are trading below their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends have fallen, or that the share price is increasing, or both. In the case of DOW, last year’s dividend was less than the 3-year average, so the dividend has been falling.
Since ALL is more of a growth company than an established blue chip, a price-sales ratio might be a more appropriate assessment. The ALL share price currently trades at a price-sales ratio of 5.68x, which compares to its 5-year long-term average of 4.87x. So, its shares are trading higher than 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 Aristocrat Leisure Limited.
