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Aristocrat Leisure Limited (ASX:ALL) saw significant share price movement during recent months on the ASX, rising to highs of AU$34.59 and falling to the lows of AU$29.30. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Aristocrat Leisure's current trading price of AU$30.36 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Aristocrat Leisure’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Aristocrat Leisure still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.2% below my intrinsic value, which means if you buy Aristocrat Leisure today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth A$31.68, then there’s not much of an upside to gain from mispricing. In addition to this, Aristocrat Leisure has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Aristocrat Leisure look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Aristocrat Leisure, at least in the near future.
What this means for you:
Are you a shareholder? ALL seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ALL for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ALL should the price fluctuate below its true value.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Aristocrat Leisure is showing 2 warning signs in our investment analysis and 1 of those is potentially serious...
If you are no longer interested in Aristocrat Leisure, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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