Games Workshop Group PLC (LON:GAW): Has Recent Earnings Growth Beaten Long-Term Trend?

For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Games Workshop Group PLC (LON:GAW) useful as an attempt to give more color around how Games Workshop Group is currently performing.

Check out our latest analysis for Games Workshop Group

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Did GAW beat its long-term earnings growth trend 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. To understand what’s happening, let’s take a look at what’s going on with margins and if the entire industry is feeling the heat.

LSE:GAW Income Statement Export January 30th 19
LSE:GAW Income Statement Export January 30th 19

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 6.6%, 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?

While past data is useful, it 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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.