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If I could pick just one high-quality super-stock to invest in right now…

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… it would be Games Workshop (LSE: GAW). This Nottingham-based miniature wargames manufacturer has gone from strength to strength over the past few years, and is showing no signs of slowing down any time soon in my opinion.

Games Workshop has consistently and regularly beaten revenue and earnings forecasts, driving the share price higher. It is now incredibly up nine-fold since I bought its shares three years ago. Its latest update was on 28th July where it once again celebrated an excellent set of results, despite having to close for six weeks due to Covid-19.

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In case you have never come across this company before, it operates in a niche area of fantasy miniatures and is predominantly a manufacturing company. Its key consumer-facing brand is Warhammer. The company has a simple and succinct description of their business model:

“We have a simple strategy at Games Workshop. We make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally at a profit. We intend to do this forever. Our decisions are focused on long-term success, not short-term gains.”

I had never come across this hobby before I first invested in this company a few years ago. It is niche and probably not everyone’s cup of tea as a hobby. Nonetheless, its business metrics speaks volumes, and I believe Games Workshop as an investment oozes quality, growth and momentum. It has really turned around since Kevin Rountree became CEO in 2015.

Will this small niche be able to grow much further?

In short, yes. Games Workshop is a global company. Miniatures are manufactured in the UK in its workshop in Nottingham, and shipped all over the world. It has increased the rate at which it releases new products and online content.

It also has a wealth of original content and intellectual property (IP) that it can monetise, which I reckon provides some exciting growth prospects for the future. Just a few months ago in May, the UK-based games developer Frontier Developments signed an IP licence with Games Workshop to develop and publish a strategy game based on the popular world of Warhammer Age of Sigmar. Further licencing with games and movie producers would provide significant upside to growth, and it is here where the excitement and potential for further grow lays: Games Workshop has signed 73 licences and is signing new ones every two to three months, so expect further news and announcements in this space.

With return on capital of a whopping 94%, an operating margin of 33%, and momentum that has driven a year-to-date share price return of 48% at time of writing, this stock is firing on all cylinders and I  believe it continues to be a “must have” premium stock for your portfolio. I will be buying more shares on any market weakness.

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Harshil Patel owns shares of Games Workshop. The Motley Fool UK 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.

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