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No different firm on the planet does precisely what Video games Workshop (LSE:GAW) does, making it one in every of my favorite FTSE 100 progress shares.
The Nottingham firm designs and manufactures tabletop gaming merchandise, which it sells by way of its personal retailers and web sites and thru third-party distributors. We’re speaking in regards to the miniatures themselves, sport equipment like cube and surroundings; the glues and paints that convey the fashions to life; and the novels and rulebooks that broaden the lore and make play potential.
As a hobbyist myself, I do know first-hand the drawing energy of its immersive universe and high-quality miniatures. It’s why I personal Video games Workshop shares in my very own portfolio, and assume buyers ought to give it critical consideration.
Progress hero
Since 1978, the corporate’s spent many years pioneering the fantasy gaming market and creating must-have video games methods like Warhammer 40,000. As such, it has what Warren Buffett would describe as a formidable financial moat — it’s cornered the market, and enjoys monumental margins due to its merchandise’ appreciable pricing energy.
Nonetheless, that’s not the one cause why (for my part) it’s top-of-the-line progress shares on the market. With the worldwide fantasy market nonetheless booming, and Video games Workshop stepping up licencing of its mental property throughout a number of media, I’m anticipating its spectacular and long-running progress story to roll on.
Most excitingly, Video games Workshop is partnering with Amazon to develop TV exhibits and movies primarily based on its Warhammer: 40,000 universe. Content material isn’t due for a few years, and there’s all the time the chance of a poorly-received adaptation. However the earnings potential — from each licencing and elevated miniatures gross sales — is gigantic.
Turning to its core operations, I really feel its pipeline of recent merchandise will proceed to drive sturdy gross sales. Refreshed variations of its Warhammer: Age of Sigmar and Warhammer: 40k have offered like proverbial hotcakes within the final two years.
Competitors is rising as different video games corporations goal a slice of this profitable market. But Video games Workshop has thus far proved it has what it takes to face up to this menace.
Strong returns
Over the past decade, Video games Workshop’s gross sales have rocketed 411% to £628.7m. Pre-tax revenue has risen by an even-more-impressive 1,480%, to £262.8m.
This displays the optimistic affect of working leverage, the place prices stay largely fastened at the same time as gross sales develop, which means every further pound of revenues drops straight into the earnings column. It additionally underlines the corporate’s efficient price administration and progress of its high-margin licencing operations.
Following this earnings surge, Video games Workshop’s share worth has leapt 2,550% to present ranges of £15.43 per share.
The fantasy big’s shares don’t come low cost consequently. Its ahead price-to-earnings (P/E) ratio of 29.9 instances is way above the FTSE common of 12.5 instances.
Given Video games Workshop’s observe file of outperformance and its future progress prospects, I believe the premium valuation is properly deserved. It’s a key plank in my portfolio, and I plan to maintain elevating my holdings over time.
