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My fellow writers on The Motley Idiot have been bigging up FTSE 250 development inventory Video games Workshop Group (LSE: GME) for years. Some have fallen for it onerous.
Ben McPoland named the tabletop miniature gaming grasp his favorite FTSE 250 inventory and even devoted a playful Valentine’s ode to it in February, the place he presciently stated it was “destined for a promotion to the FTSE 100“.
I gained’t be writing an ode to Video games Workshop. Extra like a lament. As a result of whereas I used to be effectively conscious of its allure, I by no means obtained spherical to purchasing it.
Video games Workshop is taking part in to win
And now it’s on the point of FTSE 100 glory after the shares jumped one other 25.5% during the last 12 months. Over 5 years, they’re up 139.34%.
With Video games Workshop anticipated to hitch the blue-chip index when the following reshuffle is introduced on 4 December, it’s attracting much more constructive consideration.
This morning (28 November), Hargreaves Lansdown praised its “prowess on the full sweep of manufacturing design, manufacturing, distribution and retail” that has made it a “world chief”.
Huge hit Warhammer 40,000 is essentially the most profitable miniature conflict recreation on the earth. Its tenth version drove document revenues, boosted by its online game licensing.
This push into licensing may drive additional development, as Amazon appears to develop the Warhammer universe into movies or TV collection.
I’m all the time cautious of shopping for shares after a robust run (and have missed out on a variety of high momentum shares because of this). However this means Video games Workshop has the potential to energy on.
The share’s outlook is a bit binary
On 22 November the Video games Workshop share worth surged 16% to hit yet one more all-time excessive, after the board lifted half-year steering on the again of better-than-expected latest buying and selling.
Pre-tax income are forecast to hit no less than £120m for the six months to three December. That’s up 25% from final yr’s £96.1m. Core revenues could high £260m. Licensing revenues from video video games, books, merchandise are heading previous £30m.
Right now, simply three analysts supply one-year worth targets on the inventory (a quantity that can absolutely rise). They’ve set a median share worth goal of 12,850p. That’s truly down 6.17% from right now’s 13,840p. This stokes my worry that I’m coming to this too late. Though all three nonetheless label it a Robust Purchase.
Video games Workshop’s shares aren’t low cost, unsurprisingly, with a price-to-earnings ratio of 29.2. Nonetheless, the yield of two.72% is increased than I anticipated. The board appears eager to ship dividend development, as this chart exhibits.
Chart by TradingView
Video games Workshop understands its clients and has a robust steadiness sheet and loads of money to fund development. My large fear is the Amazon tie-up. A profitable collection may raise Warhammer to a different stage, however what if followers are upset? That’s all the time a danger with cult mental property like this.
One other danger is that it by no means occurs in any respect, and the share worth slumps. This inventory is a little more binary than I’d like. I would simply have to just accept that I’ve missed the motion, and depart it’s. Though I think I’ll be penning one other lament within the months to come back.
