Since first buying Games Workshop (LSE:GAW) shares for my Self-Invested Personal Pension (SIPP), the FTSE 100 company’s risen a spectacular 90% in price. With dividends combined, the total shareholder return since December 2020 comes out at 112.6%.
That’s an average annual return of 15.9%, which trumps the broader Footsie‘s 8.8% by an enormous margin.
I’ve added to my Games Workshop holdings several times since late 2020. And I was looking to buy more for my SIPP in the near future. A near-7% share price decline over the last month gave me an extra little incentive to top up my exposure on Wednesday (7 January).
Past performance isn’t always a reliable guide to future returns. But I think the Games Workshop shares can keep outperforming as the firm enters an exciting new growth phase. Want to know why?
Market leader
Admittedly, Games Workshop’s products aren’t everyone’s cup of tea. The business manufactures tabletop gaming systems — most famously the Warhammer line — and everything that goes with them. We’re talking miniatures, paints, books, dice and so on.
It’s still a niche hobby, but it’s a fast-growing one that the company’s capitalised on to stunning effect.
In short, Games Workshop is the market leader. Its products are ahead of the field in terms of quality. And for fantasy gamers, for whom the lore is as important as the plastic models and games systems themselves, the company has the landscape to its own with franchises like Warhammer 40,000 (going since 1987).
Sales continue to rocket as a result. In the firm’s latest update, it predicted revenue growth of at least 15% for the six months to November. That’s pretty decent at a time when consumer spending remains under severe pressure.
In fact, given that the previous year also saw a new edition of key sales driver Warhammer: Age of Sigmar launched, such sales growth’s pretty remarkable.
Games Workshop’s position as unrivalled market leader also means it enjoys blockbuster profit margins. As of 1 June, core gross margin stood at a juicy 69.5%.
New growth phase
I’m expecting sales at Game Workshop’s core operations to remain white hot. What could send them into the stratosphere over the next decade is the firm’s plan to accelerate licensing of its intellectual property.
It’s due to release new film and content with streaming giant Amazon over the next few years. It’s also stepping up activity in the video games arena, with work already underway to follow up 2024’s best-selling title Space Marine 2.
Yet these plans don’t just have the potential to supercharge sales of its miniatures and games. They should (in my opinion) also deliver knockout revenues in their own right.
A top SIPP share
As with any stock, there are risks to buying Games Workshop’s shares. It’s held a dominant market position for decades, but rising competition could put this under threat. Sales might also slow if consumers continue feeling the pinch in key regions.
But on balance, I think it’s a top stock to consider for long-term returns. I certainly expect it to continue powering my SIPP for years to come.
