The Aristocrat Leisure Limited (ASX: ALL) share price is up 70% over the past year as the "pokie" and gambling machine manufacturer released a winning set of financial results for the half-year ended March 31 2017.
For the six-month period the group posted a net profit of $250 million on revenues of $1.23 billion as its Americas markets in particular delivered strong growth.
In fact revenue was up 22% over the prior half year, with the 57% profit growth showing how the group's market-leading machines allow it to command premium prices, while managing capital expenditures such as research and development.
Outside its core Australia market the group sells its pokie machines to the large gambling and casino markets of the U.S. including Las Vegas and Asian gambling hotspots such as Macau.
The mesmerising bright lights and big losses of pokie machines are a thrill too hard to resist for many players, although the catch is that they're cunningly designed to methodically fleece their users of cash without fail.
In fact the machines have become better than ever at tricking the punters into playing more, via a mix of electronic psychology and computerised technology that stimulates punters' brains into playing more and more.
This ensures the pubs and casinos profit ever more and pokie turnover has soared globally over the last five years, with Aristocrat shares up 680% in that time as demand for its best-in-class money-making electronic robbers soars.
Outlook
Aristocrat's business model may rule it out for ethical investors, but for others it may still represent good value with the group forecasting full year profit growth of 20%-30% over FY 2016.
Given its growth outlook, market dominance, reasonable balance sheet and impressive track record of growth it's no surprise the stock trades on 27x analysts' estimates for FY 2017 full year earnings per share, with a 1.3% trailing yield. These valuation metrics mean Aristocrat shares are unlikely to smoke out the value investors and the stock's big run means it could leave investors disappointed on any sign of a slowdown.
As an alternative Aristocrat's gaming machine rival in Ainsworth Game Technology Limited (ASX: AGI) trades on a conventionally cheaper valuation that reflects its mixed track record and far slower growth rates. For now I'm not a buyer of either companies' stock, but the track record of Aristocrat is impressive.
