Is Now An Opportune Moment To Examine Games Workshop Group PLC (LON:GAW)?

Games Workshop Group PLC (LON:GAW), which is in the leisure business, and is based in United Kingdom, led the LSE gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Games Workshop Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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Check out our latest analysis for Games Workshop Group

What is Games Workshop Group worth?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.22x is currently trading slightly above its industry peers’ ratio of 18.69x, which means if you buy Games Workshop Group today, you’d be paying a relatively reasonable price for it. And if you believe Games Workshop Group should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Games Workshop Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Games Workshop Group?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With revenues expected to grow by a double-digit 11% in the upcoming year, the outlook is positive for Games Workshop Group. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? GAW’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at GAW? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on GAW, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for GAW, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Games Workshop Group. You can find everything you need to know about Games Workshop Group in the latest infographic research report. If you are no longer interested in Games Workshop Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.