Picture supply: Video games Workshop plc
Video games Workshop (LSE: GAW) inventory rose 6% as we speak (5 March) within the FTSE 100, taking its one-year positive factors to round 55%. Over 5 years, the return is above 150%, together with dividends.
This multi-year surge noticed the Warhammer creator lastly enter the blue-chip index in December. The best way issues are going, it may be there to remain!
Brief and candy
The rationale Video games Workshop inventory surged to a brand new all-time excessive of 14,900p as we speak was a quick buying and selling replace. It merely mentioned that “buying and selling in January and February has been forward of expectations, with sturdy buying and selling throughout each the core enterprise and licensing. Consequently, the Group’s revenue earlier than tax for the 12 months to 1 June 2025 is estimated to be forward of expectations“.
Shareholders like myself are used to such no-frills updates. Video games Workshop prefers to let the monetary numbers do the speaking in its interim and annual studies.
This distinctive company tradition was one factor that attracted me to Video games Workshop a couple of years in the past. Not like most publicly traded corporations, it doesn’t maintain conventional earnings calls with analysts. And it doesn’t have interaction in rah-rah investor updates or high-profile acquisitions.
As a substitute, the agency has clear ambitions. That is “to make the perfect fantasy miniatures on the earth, to have interaction and encourage our prospects, and to promote our merchandise globally at a revenue. We intend to do that eternally. Our selections are targeted on long-term success, not short-term positive factors“.
Underexploited IP
For context, the market was anticipating income of £571m for FY25 (ending 1 June). In the meantime, the consensus forecast for pre-tax revenue presently sits at round £226m. This exhibits how exceptionally excessive the corporate’s revenue margins are.
I discover the replace’s point out of licencing very encouraging. That is extremely profitable income based mostly on the corporate’s treasure trove of mental property (IP).
For instance, the corporate earns royalties from online game gross sales. Within the first half of the yr, the Warhammer 40,000: House Marine 2 title helped licensing working revenue greater than double to £28m.
Video games Workshop says it owns “among the finest underexploited mental property globally“. Nonetheless, consistent with its long-term focus, administration could be very selective in the way it monetises this IP.
As Russ Mould, Funding Director at AJ Bell, factors out: “This high quality management would possibly imply it misses out on some potential earnings, however Video games Workshop needs to uphold its model values and be sure that its status isn’t tarnished by happening the Disney route of milking belongings till they’re bone dry.”
Worldwide enlargement
Now, this pickiness means licencing income will be lumpy one yr to the following. That is one danger I see right here, as a sell-off would possibly occur sooner or later if royalty earnings disappoints.
Additionally, the inventory trades at a premium. Based mostly on the present FY26 forecasts, the price-to-earnings (P/E) ratio is round 29. Which means ongoing progress should be met or the valuation may pull again sharply.
As issues stand although, the corporate is delivering the products. The Amazon deal to adapt the Warhammer 40,000 universe into movies and tv sequence is thrilling. And the primary Video games Workshop retailer in South Korea is opening, whereas enlargement in Japan and Thailand continues.
I nonetheless assume the inventory is value contemplating for long-term traders.
