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ARISTOCRAT FPO [ALL] ALL.AX

Latest Deep Dive · Written · AI research note

Bro's Verdict
Deep Dive

Rating

HOLD

Confidence

62%

Target Price

A$63.00

Upside

+2.4%

Horizon

medium

Aristocrat is a high-quality franchise with net cash, 22% ROE and 60% gross margins, but the stock trades at ~21x-25x NTM P/E for only 6.4% EPS growth, a +87% premium to its own 2-year forward average and +1.8 SD on most earnings multiples. With consensus target at $65.50 (~6% upside) and the analyst's own $63 target implying only ~2% upside, the risk/reward is skewed to the downside if multiples normalise toward the $30-$45 implied range. The analyst explicitly rates the stock neutral and advises waiting for a pullback toward $50 or proof of forward FCF recovery before adding.

Executive Summary

•Aristocrat trades at 21.3x to 25.3x NTM P/E, an +87% premium to its own 2 year forward average of 11.3x (+1.8 SD), meaning the market has already priced a full earnings recovery and the margin for execution error is thin.
•Aristocrat Gaming remains the earnings engine, with North American ship share gains and premium cabinet momentum driving H1 FY2026 market share gains across all key segments per management.
•The balance sheet is a genuine strength (Net Debt/EV 0.01x, ROE 22.0%), funding buybacks and M&A, but forward FCF growth of -9.9% and EBIT growth of just 1.3% sit awkwardly against the re rating.
•Consensus target of $65.50 implies only ~6% upside from $61.52, while implied values at historical average multiples ($23 to $33) flag meaningful downside if the multiple normalises.

Financial Snapshot

•Revenue: $6.29b TTM
•Gross margin: 60.6%
•Operating margin: 28.6%
•Net margin: 23.5%
•ROE: 22.0%
•Debt/Equity: 30.7%
•Net Debt/EV: 0.01x (effectively net cash)
•Dividend yield: 1.38%
•Consensus EBIT: $2.07b
•Cash from operations: $1.93b

Forward Outlook

•NTM EPS: $2.43 per the forward spreadsheet, versus $2.90 in the latest consensus revision snapshot (as of 2026-10-02); this discrepancy must be reconciled before sizing a position.
•Forward P/E: 25.3x on the $2.43 figure, or ~21x if the $2.90 NTM EPS is correct.
•Forward EPS growth: 6.4%, modest relative to the multiple being paid.
•Consensus EBIT: $2.07b, with EBIT growth of 1.3% and EBITDA growth of -1.9%.
•FCF growth: -9.9%, the weakest forward line item and a key watch point.
•Consensus DPS and forward revenue figures in the data feed are truncated and not reliable; treat as not disclosed.

Valuation Analysis

•NTM P/E: 25.3x on $2.43 NTM EPS (ASX spreadsheet); 21.3x on the EQRV blended forward basis versus 2 year average of 11.3x, +1.8 SD.
•NTM P/E on revised EPS: ~21x if the $2.90 consensus figure holds.
•BF EV/EBIT: 17.1x versus 2 year average of 8.9x, +92% versus average.
•BF EV/EBITDA: 14.2x versus 2 year average of 7.0x, +101% versus average.
•BF EV/Rev: 6.0x versus 2 year average of 2.5x, +144% versus average.
•LF P/BV: 6.0x versus 2 year average of 6.5x, -8% versus average, the only metric near its historical norm.
•Implied price at historical average P/E: $32.83.
•Implied price at historical average EV/EBIT: $30.26.
•Implied price at historical average EV/EBITDA: $28.69.
•Implied price at historical average EV/Rev: $22.96.
•Implied price at historical average P/BV: $66.95.
•DCF fair value: roughly $50 to $60 using WACC 9.5%, terminal growth 2.5% and mid single digit FCF growth, below the current price.
•Consensus price target: $65.50.
•EVO.ST: ~13.7x TTM P/E, live casino and online gaming supplier, structurally lower multiple.
•PLTK: ~3.4x forward P/E, social casino peer, deep value on depressed bookings.
•Aristocrat sits at a premium to both peers on forward earnings, justified only by scale, net cash and segment breadth.

Key Risks & Catalysts

Risks

•UK stake limits compress regulated online gaming revenue and could extend to other jurisdictions.
•Australian pokies reform and state level machine caps threaten the domestic installed base.
•Multiple compression risk: earnings based implied values sit at $23 to $33, well below spot.
•FCF growth of -9.9% and EBITDA growth of -1.9% undermine the premium multiple if sustained.
•NeoGames integration and iGaming/RMGT synergy delivery may slip, leaving the Interactive segment short of targets.
•The $2.43 versus $2.90 NTM EPS discrepancy signals estimate uncertainty around the forward base.

Catalysts

•Continued North American ship share gains and premium cabinet placements lifting Aristocrat Gaming revenue and mix.
•Pixel United social casino bookings stabilisation post Plarium divestment simplifying the portfolio and lifting group margins.
•Aristocrat Interactive (NeoGames) RMGT and iLottery synergies scaling into FY2027.
•Ongoing buyback program (recent ASX notifications confirm active buy backs) supporting EPS.
•US sweepstakes crackdown, with cease and desist orders or bans across 20 states, driving migration to regulated channels.
•M&A pipeline and net cash capacity to bolt on accretive content or platform assets.

Investment Thesis

Aristocrat is a high quality franchise with market leadership in gaming content and systems, a net cash balance sheet, 22% ROE and 60% gross margins. The problem is price. At ~21x to 25x NTM P/E for 6.4% EPS growth, the PEG sits around 3.3x to 3.9x, and every earnings based multiple sits at or above +1.8 SD versus its own 2 year history. The re rating from a depressed 11.3x forward average looks like normalisation plus momentum overshoot, not a durable step change, particularly with FCF growth negative and EBIT growth barely positive.

The operational story is credible. Aristocrat Gaming ship share and premium cabinet momentum, Pixel United bookings stabilisation post Plarium, and NeoGames synergy delivery are all real levers, and the US sweepstakes crackdown is a structural positive for regulated share. But these are largely reflected in the current multiple, and the regulatory backdrop (UK stake limits, Australian pokies reform) caps upside surprise.

Rate ALL neutral at $61.52 with a 12 month price target of $63, broadly in line with the $65.50 consensus but below it on valuation discipline. The risk/reward is skewed to the downside if multiples normalise toward the $30 to $45 implied range, while a clean NTM EPS reconciliation to $2.90 and evidence of FCF inflection would be required to justify a re rating above $70. Wait for either a pullback toward $50 or proof of forward FCF recovery before adding.

Written by Buy Side Bro's AI analyst from financials, consensus, filings and recent news. General information only, not financial advice.

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