Does Games Workshop Group PLC’s (LON:GAW) Past Performance Indicate A Stronger Future?

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For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Games Workshop Group PLC’s (LON:GAW) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.

View our latest analysis for Games Workshop Group

How GAW fared against its long-term earnings performance and its industry

GAW’s trailing twelve-month earnings (from 02 December 2018) of UK£62m has jumped 21% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 45%, indicating the rate at which GAW is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and whether the whole industry is facing the same headwind.

LSE:GAW Income Statement, May 7th 2019
LSE:GAW Income Statement, May 7th 2019

In terms of returns from investment, Games Workshop Group has invested its equity funds well leading to a 61% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 48% exceeds the GB Leisure industry of 7.2%, indicating Games Workshop Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Games Workshop Group’s debt level, has increased over the past 3 years from 32% to 75%.

What does this mean?

Games Workshop Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Games Workshop Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for GAW’s future growth? Take a look at our free research report of analyst consensus for GAW’s outlook.
  2. Financial Health: Are GAW’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 02 December 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.