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.
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, one way to put a broad projection on the ALL share price could be to compare its price-to-sales multiple over time. This can tell us how the company has historically been valued relative to its total revenue.
Currently, Aristocrat Leisure Limited shares have a price-sales ratio of 6.55x, compared to its 5-year average of 4.87x, meaning its shares are trading above 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. Of course, context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric, but this can be a rough starting point.
The REA share price currently trades at a price-sales ratio of 19.49x, which compares to its 5-year long-term average of 17.41x. So, its shares are trading above their historical average. Don’t forget, 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! It’s a good idea to use multiple valuation methods to value a share like Rea Group Ltd.
