Should You Be Happy With Games Workshop Group PLC’s (LON:GAW) Performance Lately?

Today I will take a look at Games Workshop Group PLC’s (LON:GAW) most recent earnings update (26 November 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the leisure industry performed. As an investor, I find it beneficial to assess GAW’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

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 26 November 2017) of UK£51.02m has more than doubled from UK£13.50m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 17.38%, indicating the rate at which GAW is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is only a result of industry tailwinds, or if Games Workshop Group has seen some company-specific growth.

Over the last couple of years, Games Workshop Group increased its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Scanning growth from a sector-level, the UK leisure industry has been growing, albeit, at a muted single-digit rate of 2.35% in the past twelve months, and a substantial 12.42% over the past five years. Since the Leisure sector in GB is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as Character Group, Photo-Me International and Tandem Group. This suggests that any near-term headwind the industry is enduring, the impact on Games Workshop Group has been softer relative to its peers.

LSE:GAW Income Statement Export July 25th 18
LSE:GAW Income Statement Export July 25th 18
In terms of returns from investment, Games Workshop Group has invested its equity funds well leading to a 67.30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 47.70% exceeds the GB Leisure industry of 6.98%, 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 30.14% to 83.46%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Games Workshop Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Games Workshop Group to get a better picture 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: Is 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 26 November 2017. This may not be consistent with full year annual report figures.

To help readers see pass 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.