I thought Jumbo Interactive delivered a solid 1H26 result and management foresee a very positive outlook. However, negative market sentiment continues to drive the share price lower hitting a 6 year low today at $8.52.

Consensus FY26 NPAT is c. 72 cps, and FY27 NPAT is expected to be c. 87 cps. That would put Jumbo on a FY26 PE ratio of 11.8 and a FY27 PE ratio below 10. That’s the lowest PE ratio on historical earnings over the last 5 years (current is 14). I’m baffled to understand why the market is so negative on the business.

For a business expected to have double digit earnings growth and a ROE over 30% the shares seem to be incredibly good value to me.

I expect that going forward Jumbo will pay a fully franked 4.3% dividend (6% gross yield) at the revised 50% payout ratio. I’m in favour of the business retaining more earnings to reinvest into growth and to reduce debt (currently 39% debt to equity).

I’m not the only one seeing value in Jumbo. Morgan’s liked the 1H26 result and have “retained their buy rating and $14.90 price target on the shares. Morgans was pleased with Jumbo's performance in the first half, noting that it delivered a solid result. In addition, it was pleased to see that managed services continues to build momentum and that underlying SaaS trends remain healthy. Another positive is that Morgans believes the company can de-lever its balance sheet in FY 2027, leaving it well-placed for the remainder of the decade”.

At the current share price I think Jumbo could reward investors with a 16% return over the next few years. I’m a happy buyer at these prices.

Held IRL and SM. Accumulating on weakness.

I was at an Investor event this week where Founder CEO Mike Verveka presented an overview of the business and answered Investor questions. As usual he was humble and transparent. There were a few takeaways that have added to my conviction and with a 5 year view, I believe Jumbo is now one of my least risky and most reliable holdings.

1. Mike explained the UK and Canada businesses in Stride, Starvale and Gatherwell are performing OK but because they help other lotteries, rather than running them themselves, the growth is likely to be single rather than double digit going forward.
2. He is off to the U.S. next week for follow up work on a possible acquisition (he also mentioned this at the AGM in Oct). And he is looking for a B2C business where Jumbo is more in control of the player experience and marketing, which they are really good at. In turn we should be expecting double digit EPS growth from this, if he can do a deal that is a fair price.
3. The balance sheet is very strong and they could survive the Armageddon outcome of losing the TLC contract in 2030 to sell Powerball tickets etc. While he says this is an incredibly low probability and they would be a much smaller company if it happened, they would still survive and be profitable. Marketing and people are their two biggest costs and these can be scaled up or down fairly quickly.
4. The SaaS business continues to do well, with recent additions including RSPCA.
5. He is very comfortable with the succession planning work thats been done. While he has no plans to go anywhere, he believes Jumbo will be a much bigger business in 10 years time and there are 4 Managers under him that are all capable and a couple that have been with him for 20 years.
6. The buybacks at the current price, are "a very easy capital allocation decision".

I will be adding to my holding IRL and on SM given these developments...