SOL share price in focus
Founded in 1903, Washington H. Soul Pattinson (WHSP) is an investment company with a diversified portfolio of assets across a range of industries and asset classes.
Some of SOL’s largest holdings include stakes in other well-known publicly listed companies such as TPG Telecom (ASX: TPG), New Hope Group (ASX: NHC) and a cross-shareholding in Brickworks (ASX: BKW).
SOL’s mission is to deliver superior returns to its shareholders by creating capital growth and steadily increasing dividends as a holding company. It’s the second-oldest publicly listed company on the ASX and has a strong track record of capital growth and dividends. In fact, it’s never missed a dividend payment since listing in 1903! It should be thought of as a family-run LIC, for the benefit of all shareholders (who are deeply aligned).
Since we consider Washington H Soul Pattinson & Company 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, Washington H Soul Pattinson & Company Ltd had an ROIC of 4.70% and revenue has compounded at -3.3% 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 gambling 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.
SOL share price valuation
We would consider SOL to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that might be important to us include the debt/equity ratio, average yield, and return on equity, or ROE. For FY24, Washington H Soul Pattinson & Company Ltd reported a debt/equity ratio of 8.5%, meaning the company has more equity than debt.
Over the last 5 years, SOL has delivered an average dividend yield of 2.4% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, SOL reported an ROE of 5.6%. For a mature business you generally want to see an ROE of more than 10%, so SOL’s returns are a bit less than what we’d expect.
As a growth company, some of the trends we would be looking for from ALL shares include revenue growth, profit growth, and return on equity (ROE). Over the last 3 years, ALL has increased revenue at a rate of 11.0% per year to hit $6,485m in FY24. Meanwhile, net profit has risen from $1,378m to $1,512m. ALL’s last reported ROE was 22.8%.
Please keep in mind that context is important – these metrics give us some indication of company performance, but we need a lot more info to work out the value of SOL or ALL shares. To learn more about valuation, I’d recommend signing up for one of our free online investing courses.
