Here's Why We Think Aristocrat Leisure (ASX:ALL) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Aristocrat Leisure (ASX:ALL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Aristocrat Leisure

How Fast Is Aristocrat Leisure Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Aristocrat Leisure's EPS shot up from AU$1.43 to AU$2.25; a result that's bound to keep shareholders happy. That's a commendable gain of 57%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Aristocrat Leisure remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to AU$6.3b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Aristocrat Leisure?

Are Aristocrat Leisure Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Our analysis into Aristocrat Leisure has shown that insiders have sold AU$67k worth of shares over the last 12 months. But this is outweighed by the trades from Independent Non-Executive Chairman Neil Chatfield who spent AU$197k buying shares, at an average price of around AU$32.82. So, on balance, that's positive.

The good news, alongside the insider buying, for Aristocrat Leisure bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$36m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Aristocrat Leisure To Your Watchlist?

You can't deny that Aristocrat Leisure has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. Astute investors will want to keep this stock on watch. Now, you could try to make up your mind on Aristocrat Leisure by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that Aristocrat Leisure is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.