Is today’s weakness in the Games Workshop share price a acquiring chance?

When a business has been as prosperous as the FTSE 250’s Games Workshop (LSE: GAW), it’s okay for the main government to blow the company’s personal trumpet.

So, I welcome CEO Kevin Rountree’s opinions in today’s 50 percent-yr effects report when he declared: An additional cracking efficiency from a truly awesome, worldwide workforce.”

He went on to position out the agency has just shipped a “solid” consequence in excess of the earlier 6 months. And that builds on “the great development and lucrative progress we have been continually delivering more than the very last five years.” 

The Video games Workshop growth tale

I concur with each term. The fantasy miniatures producer has developed its company and earnings in magnificent design. And shareholders will have small to complain about since the stock has been a wonderful financial commitment by most measures. Five a long time in the past, for illustration, the share value stood close to 540p. Right now, the stock variations arms close to 10,900p.

Growth has been amazing and very well well balanced around the period. The report displays once-a-year advances in earnings, earnings, funds movement and shareholder dividends. And the share price tag rose to reflect the underlying company development.

But that wasn’t the only driver, of training course. Each time a progress tale becomes well recognized, we are inclined to see a valuation up-ranking. And that’s precisely what took place with GAW.

Right now, the ahead-searching earnings numerous for the trading yr to May 2022 is about 30. And Town analysts have penciled in an earnings improve of around 8.5% for that calendar year. If we glimpse at preferred techniques of analysing progress shares, just one process compares the charge of earnings expansion to the earnings many. By that measure, the shares are setting up to glance costly.

And that could be a single reason the share price tag has slipped again this morning regardless of the blistering figures the agency just posted. 12 months on yr, profits rose practically 26% in the initially fifty percent of the buying and selling year, money from functions state-of-the-art approximately 66% and earnings per share elevated by close to 55%.

A properly-defended trading area of interest

However, even with the inventory weak spot now, GAW has a solid, nicely-defended buying and selling niche and is increasing overseas. In the US, for illustration, gross sales are just about as huge as the profits derived from the United kingdom and continental Europe. The outlook is positive and the expansion story could have significantly additional to operate.

At the main of its small business design, GAW makes fantasy miniatures for hobbyists to obtain. But that would not operate effectively except the firm’s shoppers have been thoroughly immersed in the fantasy universe and practical experience the corporation has produced above decades. Without a doubt, the Warhammer brand name delivers escapism for an“enthusiastic and faithful lover foundation.”

In 1 sense, the organization has designed and created its have marketplace. And it looks unlikely any competitor could disrupt GAW’s position simply by throwing cash at the obstacle. Building a viable competing working experience will most likely take time – tons of it.

So, shares in Video games Workshop have opportunity as extended as I’m geared up to perform the long game and remain invested for a long time. And I uncover today’s dip in the share selling price to be appealing in that context.

Kevin Godbold has no position in any share mentioned. The Motley Idiot Uk owns shares of Game titles Workshop. Sights expressed on the businesses pointed out in this posting are those of the writer and hence might differ from the formal recommendations we make in our subscription products and services these types of as Share Advisor, Concealed Winners and Professional. Below at The Motley Fool we consider that contemplating a assorted assortment of insights tends to make us superior buyers.