If EPS Growth Is Important To You, Games Workshop Group (LON:GAW) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Games Workshop Group (LON:GAW), which has not only revenues, but also profits. 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

How Fast Is Games Workshop Group Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. 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.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Games Workshop Group achieved similar EBIT margins to last year, revenue grew by a solid 14% to UK£471m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Games Workshop Group's forecast profits?

Are Games Workshop Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Despite UK£18k worth of sales, Games Workshop Group insiders have overwhelmingly been buying the stock, spending UK£492k on purchases in the last twelve months. An optimistic sign for those with Games Workshop Group in their watchlist. We also note that it was the CEO & Executive Director, Kevin Rountree, who made the biggest single acquisition, paying UK£238k for shares at about UK£115 each.

It's commendable to see that insiders have been buying shares in Games Workshop Group, but there is more evidence of shareholder friendly management. 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£2.3m.

Games Workshop Group's CEO took home a total compensation package worth UK£1.4m in the year leading up to May 2023. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Games Workshop Group Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Games Workshop Group's strong EPS growth. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. All in all, this stock is worth the time to delve deeper into the details. It is worth noting though that we have found 1 warning sign for Games Workshop Group that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Games Workshop Group, you'll probably love this free list of growing companies that insiders are buying.

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.