Shares in Australian gaming giant Aristocrat Leisure Limited remain undervalued, with investors caught up on temporary softness in the company’s gaming operations and therefore failing to adequately value its long reinvestment runway, according to financial services firm Morningstar.
Aristocrat is one of a handful of ASX-listed companies highlighted by Morningstar market strategist Lochlan Halloway in a Friday note in which he explored the concept of “reinvestment runway” – an ideal that captures both the durability of the moat and the universe of value-accretive investment opportunities.
While some companies can tap out substantial expansion opportunities, those with a long reinvestment runway can maximize the value of a competitive advantage and reduce the risk that they might fall into the trap of scrambling into value-destructive investments in a futile attempt to reignite growth.
