Games Workshop (LSE:GAW) has taken to being a FTSE 100 stock like a duck to water. Since entering the blue-chip index in December 2024, it has gone up another 50% or so in value.
This takes the 10-year return to approximately 4,050%. But that’s before dividends. If we include those, the 10-year annualised return is 47.2%, according to AJ Bell.
To put that into context, a £5,000 investment made a decade ago would have returned almost £240,000 by now! This is obviously very rare.
Another rare thing, though, is that Games Workshop hasn’t split its stock during this time. So it has gone from less than £5 per share in May 2016 to hit £201 this week.
Out of convention, firms will usually split their stock if the price gets too high. This can attract more individual investors, who can’t afford to buy an individual share costing hundreds (or thousands) of pounds. In this sense, it can improve liquidity.
Why hasn’t Games Workshop — the world’s largest miniature wargaming company — done so?
What’s a share split?
For the sort of forward stock split I’m talking about, it would simply mean increasing the share count by issuing new shares to existing investors. For instance, if Games Workshop did a 10-for-1 stock split, investors previously holding 10 shares would then have 100.
The cost per share would fall from, say, £200 to £20. Crucially though, there would be no change in the company’s overall valuation.
I like to think about it in terms of a pizza. The value of the holding is the same (the pizza), but it has been sliced into more individual parts.
Corporate culture
As far as I can tell, Games Workshop has never done one, despite being public since the early 1990s. Why not?
Well, it probably doesn’t need to because its shares are overwhelmingly held by institutional investors. Whether each one is £1 or £1,000 is neither here nor there to them. Meanwhile, there’s a move towards fractional shares, allowing more retail investors to get on board regardless of price.
But corporate culture probably plays a part, too. The Warhammer maker doesn’t engage in acquisitions and its trading updates are usually short and sweet because the annual report gives shareholders (like myself) everything we need to know.
Perhaps the firm will split its stock in future, but it would likely be to support its employee share scheme rather than follow market convention.
I note our promotion to the FTSE 100, but want to stress that it changes nothing… our mission is to make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally for a profit. We intend to do this forever.
Non-executive chair Mark Lam.
Pricey stock
This genuine long-term focus is what attracted me to the company, as well as its loyal customer base and ultra-high profit margins. It has valuable IP stretching back decades, with film content in the works with Amazon.
Unfortunately though, the stock’s forward price-to-earnings multiple is currently 32. This high valuation doesn’t leave much room for, say, an unexpected slowdown in growth.
If the share price was to decline 15%+, however, I think Games Workshop would be an excellent stock to consider. But I see better opportunities around right now.
