Does Games Workshop Group (LON:GAW) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Games Workshop Group (LON:GAW). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Games Workshop Group

Games Workshop Group's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Games Workshop Group's EPS has grown 23% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Games Workshop Group achieved similar EBIT margins to last year, revenue grew by a solid 14% to UK£471m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Games Workshop Group.

Are Games Workshop Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's good to see Games Workshop Group insiders walking the walk, by spending UK£517k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was CEO & Executive Director Kevin Rountree who made the biggest single purchase, worth UK£238k, paying UK£115 per share.

Recent insider purchases of Games Workshop Group stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, Games Workshop Group has a very reasonable level of CEO pay. The median total compensation for CEOs of companies similar in size to Games Workshop Group, with market caps between UK£1.6b and UK£5.0b, is around UK£2.2m.

Games Workshop Group offered total compensation worth UK£1.4m to its CEO in the year to May 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Games Workshop Group Deserve A Spot On Your Watchlist?

For growth investors, Games Workshop Group's raw rate of earnings growth is a beacon in the night. To add to the positives, Games Workshop Group has recorded instances of insider buying and a modest executive pay to boot. The overriding message from this quick rundown is yes, this stock is worth investigating further. You should always think about risks though. Case in point, we've spotted 1 warning sign for Games Workshop Group you should be aware of.

The good news is that Games Workshop Group is not the only growth stock with insider buying. Here's a list of growth-focused companies in GB with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.