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My writers at The Motley Fool they have been growing FTSE 250 stock growth Games Workshop The group (LSE: GME) years. Others fell hard.
Ben McPoland named the tabletop miniature game master his favorite FTSE 250 stock and even dedicated a playful Valentine’s ode to it in February, where he said “destined to be promoted to FTSE 100“.
I’m not going to write an ode to Games Workshop. Like crying. Because while I was well aware of its beauty, I didn’t get around to buying it.
Games Workshop plays to win
And now on the edge FTSE 100 glory after shares jumped another 25.5% in the past 12 months. In five years, they increased by 139.34%.
Since Games Workshop is expected to join the blue-chip index when the next relaunch is announced on December 4, it is attracting even more positive attention.
This morning (November 28), Hargreaves Lansdowne He praised it “expertise in the full sweep of manufacturing design, manufacturing, distribution and marketing” that made a “global leader”.
A big hit Warhammer 40,000 the most successful miniature war game in the world. Its 10th edition generated record revenue, boosted by its video game licensing.
This push into licensing could drive further growth, as Amazon looks to develop Warhammer universe into movies or TV series.
I’m always wary of buying stocks after a strong run (and have missed out on many great stocks as a result). But this suggests that Games Workshop has the potential to open up.
The concept of assignment is binary
On 22 November Games Workshop’s share price rose 16% to another high, after the board raised its half-year guidance after better-than-expected recent trading.
Pre-tax profits are expected to reach at least £120m in the six months to 3 December. That’s up 25% on last year’s £96.1m. Revenue could reach £260m. Licensing revenues from video games, books, merchandise exceed £30m.
Today, only three analysts offer one-year price targets for the stock (a number that will surely rise). They set an average share price target of 12,850p. That’s actually down 6.17% from today’s 13,840p. This makes me afraid that I will be late. Although all three are still labeled a Strong Buy.
Games Workshop shares aren’t cheap, not surprisingly, with a price-to-earnings ratio of 29.2. However, the yield of 2.72% is higher than I expected. The board seems determined to deliver dividend growth, as this chart shows.
Chart with TradingView
Games Workshop understands its customers and has a strong balance sheet and plenty of cash to support growth. My biggest concern is the Amazon tie-up. A successful series can suggest Warhammer on another level, but what if the fans are disappointed? That’s always dangerous with cult intellectual property like this.
Another risk is that it doesn’t happen at all, and the stock price goes down. This stock is more binary than I would like. I might just accept that I missed the action, and let it go. Although I suspect I will be writing another lament in the coming months.
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