There have been some phenomenal winners in the FTSE 100 over the last 15 years. Yet few have come close to delivering the stellar returns of Games Workshop (LSE:GAW).
The tabletop wargaming company has delivered the largest share price returns of any FTSE 100 company since 2010. And when combining these capital gains with dividends paid, investors have reaped an enormous 4,328% return, enough to transform a £10,000 investment into £442,790!
What’s behind the success?
There are a lot of factors influencing the success of this enterprise. Today, the firm enjoys stellar profit margins and enormous pricing power. But that wasn’t always the case. And prior to 2015, the company was actually struggling.
Everything changed when Kevin Rountree took over leadership. Under his control, the marketing strategy for its Warhammer games became significantly more transparent to the community. Instead of keeping things secretive, the firm began actively sharing what’s in the development pipeline. This not only resulted in far better engagement with the Warhammer fan base but also offered opportunities to build hype around upcoming releases.
While it may seem like a small thing, this relatively simple shift in tactic ultimately cultivated a cult-like following among customers. Pairing this with the expansion of digital content and licensing arrangements, the world of Warhammer became far more accessible across multiple channels beyond the tabletop, drawing in an increasingly bigger audience.
Combined, this all translated into surging revenue and profits, while transforming the business from an average hobby into a global phenomenon. With that in mind, it’s not so surprising that the stock has delivered such stellar gains for shareholders.
Too late to buy?
With so much growth already under its belt, should investors be considering adding this company to their portfolios in 2025?
The chances for another 4,328% gain by 2040 seem slim. Why? Because that would put Games Workshop’s market capitalisation at £227bn, which doesn’t seem likely. After all, that’s three times more than the most valuable IP in the entertainment sector today (Pokémon). Yet, that doesn’t mean there isn’t room for substantial growth moving forward.
Warhammer continues to gain traction. And with a new Amazon TV show currently in development starring Henry Cavill, the brand awareness could be set to explode in the coming years, potentially sparking its own Disney-like, Marvel-like universe of content.
In the meantime, the firm’s loyal fanbase keeps coming back for more whenever new miniatures are released, generating sticky and recurring revenue. Of course, that doesn’t mean Games Workshop is guaranteed to be a home run.
With all manufacturing done in its Nottingham factory, production bottlenecks and supply chain disruptions pose significant challenges to the business. And with investors pricing this stock at a premium, even a temporary hiccup could trigger volatility in the share price moving forward.
Overall, Games Workshop still has plenty to offer, in my opinion. So, for investors seeking long-term growth, this might be a business worthy of closer inspection.
