ALL share price in focus
Aristocrat Leisure is an Australian gambling machine operator headquartered in Sydney. It was Founded by Len Ainsworth in 1953
Today, Aristocrat is the largest gambling machine manufacturer in Australia and one of the largest manufacturers of slot machines in the world. However, the business has also diversified over the years and now also makes online mobile games. This segment has grown steadily to now make up nearly half of the company’s revenue.
The gaming machines Aristocrat make 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.
While it may be large, Aristocrat Leisure Limited is a growth stock, and so it requires a different set of rules and may not be simple to value at times. Studies have shown that over 5-10+ years, it’s top-line revenue growth which explains a stock’s performance. That’s why it’s good to see Aristocrat Leisure Limited is able to grow revenue at 11.0% per year, a good clip.
REA shares
REA Group, best known for its realestate.com.au platform, is a Melbourne-based real estate advertising company majority-owned by News Corp.
Today, REA Group 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 bulk of revenue. Within Australia, REA makes money by listing properties for sale or rent and charging listing fees. They also have a financial services arm offering services like mortgage broking, but this is a much smaller part of the business.
REA’s competitive advantages, like any other established platform, are network effects and economies of scale. In other words, Domain (the #2 market player) is significantly smaller than REA in terms of users and views. This gives REA greater market power and pricing control. 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, some of the trends we might investigate from ALL include revenue growth, profit growth, and return on equity (ROE). These measures can indicate the growth rates and prospects of the company, as well as their ability to generate returns from their assets.
Since 2021, ALL has grown revenue at a rate of 11.0% per year to reach $6,485m in FY24. Over the same stretch of time, net profit has increased from $1,378m to $1,512m. ALL last reported a ROE of 22.8%.
Over the last 3 years, REA has increased revenue at a rate of 18.6% per year to hit $1,677m in FY24. Meanwhile, net profit has fallen from $323m to $303m. REA’s last reported ROE was 18.9%.
Please keep in mind that context is important – these metrics give us some indication of company performance, but it’s just the start of valuing ALL or REA shares. To learn more about valuation, check out one of our free online investing courses.
