This FTSE AIM stock is primed for growth as part of a £6bn industry in the UK!

Jabran Khan details a FTSE AIM stock which is in a £6bn industry. Could it grow to be a major player and boost his holdings?

| More on:

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.

According to Statista, the UK gaming industry is worth £6bn and it is only set to grow. With that in mind, is FTSE AIM incumbent Team17 (LSE:TM17) worth adding to my holdings? Let’s take a closer look.

Gaming on the rise

Team17 is a British video game development company with a two-pronged approach. It creates and develops many well-known, premium games, but also partners with smaller independent developers to help them access the lucrative gaming market. As I write, it has over 90 games in its portfolio. Some of its best known titles include the Age of Darkness franchise, and Hammerting.

As I write, Team17 shares are trading for 718p. At this time last year, the shares were trading for 12% higher, at 818p. Many FTSE stocks have experienced their share price’s meandering due to current macroeconomic issues causing a stock market correction. 

For and against investing

FOR: Team17’s performance, recently and historically, has been excellent. I do understand that past performance is not a guarantee of the future, however. Looking back, it has seen revenue and gross profit increase year on year for the past four years. Coming up to date, a trading update released in January for the year ending 31 December was good. Performance exceeded management expectations. Full detailed results are due at the end of March and will show just how well Team17 did. Most of the FTSE stocks I am reviewing have a good track record of performance.

AGAINST: Although a lucrative market, the gaming industry is extremely competitive and includes many well known companies that produce blockbuster titles and have done so for many years. Names such as Microsoft and Electronic Arts spring to mind. Team17 is a smaller firm compared to these and could be out-muscled and outmanoeuvred in the long term. Gaining market share from household names is not easy.

FOR: A recent study conducted by global consultancy firm Accenture reported that the gaming industry has seen its numbers increase by half a billion players in the past three years. It is also predicting a further 400m new gamers by the end of 2023. Team17’s continued growth and success in a lucrative, burgeoning market could help boost its performance and any returns I hope to make.

AGAINST: At current levels, the Team17 shares look a tad expensive. It sports a price-to-earnings ratio of 42. This usually tells me two things. Firstly, any growth expected ahead could already be priced in. Next, there is a risk that market issues as well as any negative news could have a detrimental impact on the share price and overall investor sentiment. An example of this would be a flagship game receiving a negative review or reaction.

A FTSE stock I’d buy

Overall, I like Team17 shares for my holdings and would buy them. I keep an eye on growth markets and as a keen gamer myself, it is an industry I like to watch in particular. I like Team17’s approach with its indie gaming market accessibility with partnerships with newer developers. The gaming market is only set to grow and the FTSE AIM incumbent could end up commanding a decent slice of a very big pie, in my opinion. This could lead to increased performance and some nice returns for my holdings.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A top UK value stock to buy from the FTSE 250!

Stock market weakness has left many quality shares looking ultra cheap. I'm on the hunt for UK value stocks and…

Read more »

Elevated view over city of London skyline
Investing Articles

Can the tempting M&G dividend yield of 8%+ last?

The M&G dividend has increased again this week. But will it last in a challenging economic environment -- and should…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

A FTSE 100 passive income stock I’ve bought to hold for 30 years!

This FTSE 100 stock has proved to be a brilliant buy for passive income over the past decade. Here's why…

Read more »

Modern suburban family houses with car on driveway
Investing Articles

Should I snap up Taylor Wimpey shares at £1.30?

With the Taylor Wimpey share price down by almost 30% this year, should I snap up some shares while it's…

Read more »

Young female analyst working at her desk in the office
Investing Articles

How I’m finding shares to buy now – and keep for a decade

Our writer has been looking for shares to buy using an approach that looks both at long-term profit prospects and…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

What’s happening to the Petrofac (PFC) share price?

The Petrofac (LON:PFC) share price has had a seriously erratic year so far. I take a look at the latest…

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

The Aviva share price is flying! Should I buy this 7% yield?

Despite recent gains, Roland Head thinks the Aviva share price could still be too cheap.

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Here’s 1 passive income opportunity not to be missed!

This Fool details a passive income opportunity that could bolster his holdings, and the shares trading at cheap levels too.

Read more »