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Does Games Workshop Group PLC’s (LON:GAW) Past Performance Indicate A Stronger Future?

Brent Freeman

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In this commentary, I will examine Games Workshop Group PLC’s (LON:GAW) latest earnings update (02 December 2018) and compare these figures against its performance over the past couple of 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.

Check out our latest analysis for Games Workshop Group

Did GAW’s recent earnings growth beat the long-term trend and the 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. Why could this be happening? Well, let’s examine what’s transpiring with margins and if the whole industry is experiencing the hit as well.

LSE:GAW Income Statement Export February 11th 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?

Games Workshop Group’s track record can be a valuable insight into its earnings performance, but it certainly 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. I recommend you 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: 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.