Over the last decade, the FTSE 100 share index has delivered an average annual return of 6.3%. That’s not bad, but investors could have made a larger stack of cash by buying some high-quality individual shares.
Games Workshop‘s (LSE:GAW) delivered a spectacular 43.7% average annual return since 2015, driven chiefly by a surging share price. Earnings have taken off as demand for its Warhammer games systems and associated miniatures has exploded.
And I expect it to continue outperforming the broader Footsie over the next 10 years.
Market leader
The Nottingham company’s been making fantasy tabletop gaming products since the early ’80s. Yet the niche market in which it operates is stronger than ever and continues growing at rapid pace.
As the undisputed market leader, Games Workshop is in the box seat to capitalise on this. For the 12 months to 1 June, core revenues are tipped to be “not less than” £560m when results are released next month. That’s up substantially from £494.7m in financial 2024.
The wargaming hobby has scope for further substantial growth as it reaches new global audiences. And Games Workshop’s capitalising on this through steady expansion — it planned for 28 net new stores last year to take the total above 570.
Licence to print money
Can the company continue delivering the same sort of returns as the last decade, though? I think it can, helped by plans to also supercharge licencing activity across television, video games, and other media.
Games Workshop has a treasure trove of intellectual property (IP) that it’s built up over decades. Its Warhammer 40,000 sci-fi franchise, for instance, has been going strong since 1985. And it’s making strong progress in capitalising on this through extra licencing deals, which is having the additional effect of boosting consumer interest in its core gaming operations.
For financial 2025, the company expects to have made record licencing revenues of around £50m, driven by stunning sales of its Warhammer 40,000: Space Marine 2 video game. Corresponding turnover was back at £31m last year.
In December, Games Workshop signed an agreement with Amazon to make films and TV content based on Warhammer 40k, and which could expand to other IP later on. Production is likely to take a number of years, but it has the potential to blast Warhammer further into the mainstream and take revenues to the next level.
An exceptional share
As with any stock, investing in Games Workshop shares also involves taking on some risk. For instance, the business may endure rising costs and falling US demand as trade wars ignite.
North America is the company’s single biggest market. But it makes all of its product in the UK, leaving it exposed to new ‘Trump Tariffs.’
But on balance, I think the FTSE company’s well placed to keep delivering market-beating returns. I think it’s fully deserving of a premium price-to-earnings (P/E) ratio of 28.2 times.
