This FTSE 250 stock’s been one of the most lucrative investments on the entire London Stock Exchange. In fact, it’s responsible for a large portion of ISA millionaires today, coming in just behind Ashtead – another millionaire-making stock. I’m talking, of course, about Games Workshop (LSE:GAW).
Investors who maximised their ISA allowance into this enterprise while simultaneously reinvesting dividends since 1999 are now sitting on just over £9m! And even after all this growth and income, it looks like Games Workshop’s only just getting warmed up.
Defying expectations
For those unfamiliar with Games Workshop, it’s the mastermind behind the Warhammer IP. Hobbyists and tabletop gamers collect, assemble, and battle with armies of plastic miniatures in a variety of games. The hobby’s supplemented with a catalogue of paints and equipment as well as a huge collection of novels that provide lore and background to the worlds of Warhammer.
Is it nerdy? Yes. Is it profitable? Extremely.
Games Workshop’s managed to create a cult-like following from its customers on the back of what’s ultimately an exceptionally addictive hobby. And with such loyalty comes immense pricing power. The plastic miniature kits aren’t cheap. And those looking to build a fresh army today can expect to spend at least several hundred pounds.
So when inflation came along and triggered a cost-of-living crisis, most investors naturally assumed that growth would slow. After all, these are premium products, and with most households looking to cut costs, they shouldn’t be high on the shopping list.
As it turns out, this assumption was entirely wrong. Games Workshop’s revenue and profits continued to surge, reaching record highs. And based on its latest set of results, this momentum’s carried over into 2024.
Inspecting the results
Revenue for its 2024 fiscal year (which ended in June) came in 11% higher than a year ago, with operating profits climbing 18.6% on the back of further margin expansion.
It seems the group’s launch of the 10th Edition of Warhammer: 40,000, along with the reintroduction of Warhammer: The Old World, has resonated with fans. And with a line of new miniatures and novels on their way, the group’s core revenue stream seems set to continue expanding into 2025.
At the same time, licensing income could be about to surge as well. With the highly anticipated release of Space Marine 2 in September, a spike in royalties appears to be heading to Games Workshop’s bottom line. Of course, this assumes that the game’s a success – something that’s far from guaranteed, as proven by the lacklustre reception of Realms of Ruin, released last November.
The same applies to the rest of its line-up. With so many big product launches recently, maintaining the growth may prove challenging. And we’ve already seen some early signs of falloff, resulting in a fairly flat share price performance so far this year. Given the FTSE 250 stock’s premium valuation, a sudden downturn in sales could introduce a lot of unpleasant volatility.
Nevertheless, this business has a habit of defying expectations. And that’s why I’m eager to top up my existing position when I have more capital at hand.
