The Aristocrat Leisure Limited (ASX: ALL) share price is trading lower with the market on Friday morning.
At the time of writing, the gaming technology company's shares are down 1.5% to $30.12.
Is this a buying opportunity?
While Aristocrat Leisure shares certainly aren't the bargain buy they were just a few months ago, I still see a lot of value in them at the current level.
Based on today's share price, I estimate that they are changing hands at approximately 23x FY 2021 earnings.
I think this is good value for a company which has the potential to grow its earnings at an above-average rate over the 2020s. This is thanks to its growing digital business and its industry-leading poker machines.
Goldman Sachs reiterates its buy rating.
I'm not the only one that is positive on Aristocrat Leisure.
According to a note out of Goldman Sachs this morning, the broker has reiterated its buy rating and lifted the price target on its shares to $32.77.
This price target implies potential upside of almost 9% for its shares over the next 12 months excluding dividends. This increases to over 10% including them.
Why is Goldman bullish on Aristocrat Leisure?
On Thursday the company held an investor round table event which Goldman Sachs went to.
And while there was limited quantitative disclosure provided, the broker "walked away incrementally positive, with management clearly very much focused on investing for long term growth."
Some of the key takeaways from the event included gaming ops trends across North America remaining solid, digital trends remain sound (albeit slowing off peaks in May), management continues to focus on D&D investment spend for longer term growth, and its balance sheet and liquidity remains robust. The latter leaves the company well-placed for either organic or M&A opportunities.
It concluded: "With our revised TP [target price] implying >10% TSR [total shareholder return], we remain Buy on ALL and note i) valuation support, with the stock trading on a 24mf PER of c.18X, below its 19X 10Y avg, ii) Balance sheet strength, (iii) intent to continue investing for long term growth, and iv) its exposure to digital tailwinds."
