Lottery (ASX:TLC) Shares Face Margin Squeeze Behind Premium Valuation

Lottery closed at A$5.36 on Wednesday, with the share price under mild pressure over the past month even before investors processed the full FY26 story. The headline is margin strain. Trailing net profit margin has slipped to 8% from 9.7% a year earlier, while the stock still trades on a rich P/E of 41.9x compared with a Global Hospitality industry average of 18.8x.

For short term traders, that mix of softer profitability and premium valuation can sting. Long term holders will focus more on how those margins interact with revenue growth, earnings forecasts and a stretched balance sheet over the coming years.

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FY 2026 Earnings Summary

• Revenue (FY 2026 vs FY 2025 PCP): A$3,574.1m vs A$3,752.5m (down 4.8%)
• Net Income (Excl. Extra Items, FY 2026 vs FY 2025 PCP): A$284.6m vs A$365.5m (down 22.1%)
• Basic EPS (FY 2026 vs FY 2025 PCP): A$0.128 vs A$0.164269 (down 22.1%)
• Net Profit Margin (Trailing 12 Months vs Prior Year): 8% vs 9.7% (compressed by 1.7 percentage points)

Prefer clean visuals instead of scrolling through rows of shrinking margins and P/E multiples for Lottery? See the full financial picture, including a simple valuation view pulled together for you in our company report for Lottery.

Lottery Corporation bull case meets mixed milestones

Bulls argue The Lottery Corporation can use long licences and digital shift to grow margins even when jackpots are soft. FY26 shows resilience rather than clear step change. Group revenue of A$3.6b and EBITDA of A$736m fell only modestly in what management describes as a one in 45 year weak jackpot year. Base games grew about 5.6% and Instant Scratch Its almost 8%, which supports the idea of a broad, dependable player base. Cost programs cut OpEx to A$296m and helped hold the dividend at A$0.165. Digital share moved higher by about 90 bps and new app features are rolling out. The bull story of a higher margin, digital led lottery is not disproved, but the drop in net income to A$284.6m and EPS down 22.1% show that margin upside is not yet visible at the bottom line.

Bear case on margins, leverage and disruption gains traction

Bears focus on margin pressure, debt funded licence costs and regulatory risk. FY26 gives them several data points. Net income before extra items fell from A$365.5m to A$284.6m and EPS slipped 22.1%. Trailing net profit margin compressed from 9.7% to 8%. Management reports leverage of 3.1x and about 4.2x when adjusting for the Victorian licence and jackpot normalization. New borrowings for that licence come at higher interest rates. Net interest expense already rose about 4% and is expected to rise further in FY27. Regulatory risk is not theoretical. A federal reform could remove about A$25m of EBITDA if online Keno is banned. Digital share is improving only gradually, so the protection against retail or demographic headwinds is still being built.

Reveal where the surface looks calm but the models start to diverge on Lottery by accessing the multi year revenue and earnings analyst estimates for Lottery.

Stay Ahead Of Your Next Move

If Lottery looks interesting but margin pressure and a premium P/E are giving you pause, register for free with Simply Wall St and add it to your Watchlist so you can track the share price against fair value and wait for a setup that suits you. Once you decide to take a position, use the Portfolio Command Center to cut through market noise and focus on the key updates that actually matter to your holdings. Over the longer term, tap into the Community to see how other investors are thinking about the same risks and catalysts you are weighing. This way you can surface potential turning points early and stay a step ahead of the wider market.

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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.

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