The Aristocrat Leisure Limited (ASX: ALL) share price had a weak finish to 2018 with a decrease of approximately 7% for the year. Aristocrat's share price managed to reach an all-time high of $32.93 in the middle of 2018 before dropping 35% shortly after.
Currently Aristocrat's share price is up 20% since the start of 2019. At a share price of $25.41, I think Aristocrat is worth looking into.
FY2018 showed strong profitability figures that are likely to carry into FY2019.
In FY2018, Aristocrat managed to increase its revenue by 47.7%, EBITDA by 32.7% and NPAT by 24.6%. This resulted in an earnings per share increase of 10.4% and a dividend per share increase of 35.3%.
Despite the strong profitability figures reported, the share price continued to tank after the annual report.
Aristocrat's share price is showing value.
At a share price of $25.41, Aristocrat trades at a price to equity of 29.01. This is marginally higher than the industry price to equity of 28.94.
The slight premium in share price is justifiable with Aristocrat's profitability.
Additionally, the dividend payout ratio sits comfortably at 54.13 which should be sustainable if Aristocrat can continue to increase profitability at its current rate.
The trading outlook in February reaffirmed that Aristocrat is on track.
Late February 2019, Aristocrat announced its trading outlook which appeared positive. There is continued growth into Aristocrat's digital portfolio of assets which now represents 27% of segment profit across its casino and casual games.
Moving forward, Aristocrat continues to place the majority of its investment into design and development. Using this investment, Aristocrat plans to stay ahead of the market with innovation for entertainment to increase its customer base.
With the increase in cash flow from operating activities, Aristocrat should be able to maintain the current rate of investment into its design and development. In due course, this investment will be realised which should lead to stronger profitability figures.
Foolish takeaway
With the Aristocrat share price tanking in 2018, it is currently trading at a share price which shows value. Based off the previous annual report and trading outlook, it appears that Aristocrat is on track to meeting its goals for 2019.
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