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My fellow writers on The Motley Idiot have been bigging up FTSE 250 progress inventory Video games Workshop Group (LSE: GME) for years. Some have fallen for it exhausting.
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 received’t be writing an ode to Video games Workshop. Extra like a lament. As a result of whereas I used to be properly conscious of its allure, I never got round to buying it.
Video games Workshop is enjoying to win
And now it’s on the point of FTSE 100 glory after the shares jumped one other 25.5% over the past 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”.
Large hit Warhammer 40,000 is essentially the most profitable miniature battle sport on the planet. Its tenth version drove report revenues, boosted by its online game licensing.
This push into licensing may drive additional progress, as Amazon appears to be like to develop the Warhammer universe into movies or TV sequence.
I’m all the time cautious of shopping for shares after a powerful run (and have missed out on plenty of high momentum shares in consequence). However this implies 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 one more all-time excessive, after the board lifted half-year steering on the again of better-than-expected current buying and selling.
Pre-tax earnings are forecast to hit at the very least £120m for the six months to three December. That’s up 25% from final 12 months’s £96.1m. Core revenues could high £260m. Licensing revenues from video video games, books, merchandise are heading previous £30m.
In the present day, simply three analysts supply one-year worth targets on the inventory (a quantity that can certainly rise). They’ve set a median share worth goal of 12,850p. That’s truly down 6.17% from at the moment’s 13,840p. This stokes my worry that I’m coming to this too late. Though all three nonetheless label it a Sturdy 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 greater than I anticipated. The board appears eager to ship dividend progress, as this chart exhibits.
Chart by TradingView
Video games Workshop understands its clients and has a powerful stability sheet and loads of money to fund progress. My massive fear is the Amazon tie-up. A profitable sequence may raise Warhammer to a different degree, however what if followers are disenchanted? 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 simply 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.
