Image source: Games Workshop plc
Games Workshop (LSE: GAW) stock rose 6% today (5 March) in the FTSE 100, taking its one-year gains to around 55%. Over five years, the return is above 150%, including dividends.
This multi-year surge saw the Warhammer creator finally enter the blue-chip index in December. The way things are going, it might be there to stay!
Short and sweet
The reason Games Workshop stock surged to a new all-time high of 14,900p today was a brief trading update. It simply said that “trading in January and February has been ahead of expectations, with strong trading across both the core business and licensing. As a result, the Group’s profit before tax for the 12 months to 1 June 2025 is estimated to be ahead of expectations“.
Shareholders like myself are used to such no-frills updates. Games Workshop prefers to let the financial numbers do the talking in its interim and annual reports.
This distinctive corporate culture was one thing that attracted me to Games Workshop a few years ago. Unlike most publicly traded companies, it doesn’t hold traditional earnings calls with analysts. And it doesn’t engage in rah-rah investor updates or high-profile acquisitions.
Instead, the firm has clear ambitions. This is “to make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally at a profit. We intend to do this forever. Our decisions are focused on long-term success, not short-term gains“.
Underexploited IP
For context, the market was expecting revenue of £571m for FY25 (ending 1 June). Meanwhile, the consensus forecast for pre-tax profit currently sits at around £226m. This shows how exceptionally high the company’s profit margins are.
I find the update’s mention of licencing very encouraging. This is highly lucrative revenue based on the company’s treasure trove of intellectual property (IP).
For example, the company earns royalties from video game sales. In the first half of the year, the Warhammer 40,000: Space Marine 2 title helped licensing operating profit more than double to £28m.
Games Workshop says it owns “some of the best underexploited intellectual property globally“. However, in line with its long-term focus, management is very selective in how it monetises this IP.
As Russ Mould, Investment Director at AJ Bell, points out: “This quality control might mean it misses out on some potential income, but Games Workshop wants to uphold its brand values and ensure that its reputation isn’t tarnished by going down the Disney route of milking assets until they are bone dry.”
International expansion
Now, this pickiness means licencing revenue can be lumpy one year to the next. This is one risk I see here, as a sell-off might happen at some point if royalty income disappoints.
Also, the stock trades at a premium. Based on the current FY26 forecasts, the price-to-earnings (P/E) ratio is around 29. That means ongoing growth will have to be met or the valuation could pull back sharply.
As things stand though, the company is delivering the goods. The Amazon deal to adapt the Warhammer 40,000 universe into films and television series is exciting. And the first Games Workshop store in South Korea is opening, while expansion in Japan and Thailand continues.
I still think the stock is worth considering for long-term investors.
