This ASX 200 share has soared 22% this year. Is it still a buy?

Is it a gamble to buy this ASX stock? Analysts don't seem to think so.

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Key points

  • There aren’t many ASX 200 shares that have done better than the 22% rise in Aristocrat Leisure shares this year
  • The company is achieving both revenue growth and profit growth in the double digits
  • Most analysts rate it a buy

The S&P/ASX 200 Index (ASX: XJO) share Aristocrat Leisure Limited (ASX: ALL) has done very well this year to date, rising by more than 20%. In this article, I'm going to examine whether it can keep rising.

For readers who haven't heard of Aristocrat Leisure before, it's one of the biggest businesses on the ASX with a market capitalisation of $25 billion, according to the ASX.

The business is a major provider of poker machines and it's also involved in mobile games publishing. The ASX 200 share's "regulated gaming products" are approved for use in more than 300 licensed jurisdictions and are available in more than 100 countries. Aristocrat describes its online Anaxi division as 'real money gaming'.

What's going on with the ASX 200 share right now?

It was only a few weeks ago that the company released its FY23 half-year result to 31 March 2023. Revenue grew by 12% to $3.08 billion, while underlying net profit after tax (NPATA) grew by 13.6% to $658.8 million. Reported net profit after tax (NPAT) went up by 27.3% to $653 million. Operating cash flow rose by 22% to $613.1 million.

On the back of those numbers, the Aristocrat Leisure board decided to grow the interim dividend by 15.4% to 30 cents per share.

The company attributed its growth to the "outstanding performance" of its North American gaming operations and global sales of its machines, as well as a "resilient" performance from its Pixel United business in a "challenging environment".

Aristocrat Leisure also gave a promising outlook for FY23. It said that it's expecting NPATA growth over FY23, with "continued strong revenue and profit growth" at its Aristocrat Gaming division. This would be underpinned by "market-leading positions and recurring revenue drivers" in its gaming operations.

It's also expecting an improved profit in the second half of FY23 compared to the prior corresponding period in Pixel United, though the full year is expected to be moderately below the level reported for FY22. Further investment in Anaxi is expected to support its online 'real money gaming' ambitions.

Over the longer term, the ASX 200 share is expecting to continue to gain market share in "all key segments", as well as delivering "high-quality, profitable growth". It also said it's going to invest to diversify the business, support long-term growth, and "maximise shareholder returns."

Are Aristocrat Leisure shares a buy?

Looking at the analyst ratings collated by Commsec, there are 13 buy ratings, two holds, and no sells at all.

The company is clearly liked. As a business involved in gambling, it may not tick all the ESG investing boxes. But it is growing internationally, it's demonstrating operating leverage as profit grows faster than revenue, and the dividend continues to grow.

A business that can grow profit can increase its share price, while also funding larger dividends.

Out of the largest ASX 200 share blue chips, it may be one that can deliver strong compounding profit growth in the next few years — and analysts certainly like the company.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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