Is It Time To Consider Buying Games Workshop Group PLC (LON:GAW)?
Games Workshop Group PLC (LON:GAW), is not the largest company out there, but it saw a significant share price rise of 30% in the past couple of months on the LSE. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Games Workshop Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Games Workshop Group Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 31.07x is currently trading slightly above its industry peers’ ratio of 29.32x, which means if you buy Games Workshop Group today, you’d be paying a relatively sensible 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 the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Games Workshop Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
See our latest analysis for Games Workshop Group
Can we expect growth from Games Workshop Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -3.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Games Workshop Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? GAW seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on GAW, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on GAW for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on GAW should the price fluctuate below the industry PE ratio.
Diving deeper into the forecasts for Games Workshop Group mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in Games Workshop Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.