The Motley Fool

Is there more upside to Games Workshop Group plc after profits more than double?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in Games Workshop (LSE: GAW) were up over 5% in early trading this morning as the £234m cap released its latest set of interim results to the market. This builds on the 75% rise in the stock over the last six months alone. Let’s take a look at why investors are flocking to the company.

Excellent interims

In the six months to 27 November, revenue at the Nottingham-based maker of fantasy figurines jumped to £70.9m, a rise of 28% compared to the same period in 2015. Pre-tax profits came in at £13.8m — well over 50% higher than last year — and earnings per share rocketed 128% from 14.9p to 34p per share. Positively, there was growth in both retail and trade channels across all territories and an 8% rise in internet sales. Shareholders should be particularly pleased with the latter given the importance of offering a positive online experience for consumers these days.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Commenting on the results, CEO Kevin Rountree stated that the company had made “good progress” on strategic initiatives and that he was “delighted” that the firm’s new approach to marketing and merchandising had been warmly received by hobbyists. Although tight-lipped on plans for the future, he did reflect on his desire to “build on these improvement in the second half“.

So, a very encouraging update from the business, more than justifying today’s rise. The question is whether the shares can continue their recent momentum.

Room to grow?

There remain many attractions to investing in Games Workshop. Shares currently trade on a reasonably low price-to-earnings (P/E) ratio of 13. A yield of over 6% on offer should also get income investors salivating, even if the level of cover has looked rather precarious over recent years.

Another appeal of the company is the excellent levels of return on capital it has managed to generate. Indeed, thanks to the improvements in operating profits, today’s report highlighted a rise from 36% in November 2015 to 40% in November 2015. Generally speaking, companies achieving consistently high numbers on this ratio are those worth keeping an eye on. After all, the ability of a company to finance its own growth internally shouldn’t be dismissed lightly.  

Given the seismic political events of last year, it’s also encouraging that today’s report identified the biggest risk to the company as being related to management and the need to retain “great people“. If this is what investors should be most concerned about, I doubt most will be losing sleep.

Despite this, it’s only natural if some investors choose to bank profits after such a stellar run. Those worried that shares have peaked may wish to consider toy designer, developer and distributor Character Group (LSE: CCT). On a forecast p/e of just under 10, shares in the £108m cap are cheaper than Games Workshop, even though the former manages to generate even larger returns on capital compared to its peer.

In December, Character – which holds licences to brands including brands such as Peppa Pig and Teletubbies — reported 22% increases in revenue and underlying pre-tax profits. The substantial 33% increase to the interim dividend — leaving the company’s shares offering a well-covered yield of 3.3% for 2017 — is another bonus. With £29m cash on the balance sheet far exceeding that of Games Workshop and a growing international presence, I think the New Malden-based company’s prospects are just as good as those of the former.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.