Investors and shareholders keeping an eye on leading ASX-listed gaming machine manufacturers Aristocrat Leisure Limited (ASX: ALL) and Ainsworth Game Technology Limited (ASX: AGI) could be forgiven for scratching their heads in bewilderment at the divergent share price performances of these two stocks.
Over the past 12 months, Aristocrat has produced a market-beating share price performance of 56%. In contrast, Ainsworth's share price has sunk 22%; meanwhile the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has added around 2%.
Here's what's been happening recently:
- Aristocrat, which operates on a 30 September financial year, released its interim results in late May. For the six months ending 31 March 2015, Aristocrat reported a 73.5% jump in revenues to $685 million and a 45.4% surge in fully diluted earnings per share (before amortisation) to 17.2 cents per share. Management provided guidance that it expects a second half profit performance "broadly in line with the first half."
- Ainsworth, which operates on a standard financial year basis, issued a trading update in early June regarding its expected full year results. The announcement stated that the group expected net profit after tax for the 2015 financial year to be similar to the $61.6 million profit report in the prior year. Explaining the lack of growth – management noted that the Australian operations remained under pressure while the international operations continued to expand. The company also noted that it "expects to deliver strong organic revenue and profit growth in FY16."
Which is the better bet?
Aristocrat is obviously enjoying a sweet spot in terms of its growth profile at present, however, arguably Aristocrat's stock is being priced accordingly. In contrast, Ainsworth appears to have been relegated to being priced on very low expectations for future growth. Given the consistency for businesses to revert towards long-run averages there is a real possibility that Ainsworth's shares are currently priced attractively.
