1 irresistible FTSE growth stock I’ve been buying in July

A pastel colored growing graph with rising rocket.

I’ve barely made any single company share purchases in 2022. That all changed last week when I started accumulating a FTSE growth stock that’s been on my shopping list for a while. Although I’m not counting my chickens, the momentum since then has been pretty positive.

Quality growth stock

At the time of purchase, the Games Workshop (LSE: GAW) share price had endured a pretty awful year so far. The fantasy figurine maker and owner of the Warhammer franchise changed hands for a little over 7,000p. That was roughly 30% below where it stood at the start of the year.

To me, that screamed opportunity for several reasons.

Robust earnings

First, this FTSE 250 member seems to be trading just fine. In fact, while other consumer discretionary stocks have seen earnings tumble as lockdown tailwinds of 2020 and 2021 have subsided, it’s clear Games Workshop is still charging ahead.

Today, it announced that core revenue for the financial year just ended came in at £386.8m. That’s up 9.5% on the £353.2m achieved in 2020/21. Royalties from video games came in almost 72% higher than the previous year at £28 million. Pre-tax profit was £156.5m — up from £150.9m.

Crisis? What crisis?

Solid track record

Another reason for snapping up this growth stock now is its brilliant track record.

It has long generated stonking returns on the money it puts to work. As an investor, this is hugely attractive to me. Any firm that can do this consistently and reinvest what it makes will compound in value, increasing my wealth in the process. It’s exactly this reason that’s allowed the Games Workshop share price to multi-bag over the years.

Sound fundamentals

This is also a conservative company when it comes to its finances. I find that very comforting since it means the £2.5bn cap should be more resilient to setbacks when they (inevitably) occur.

As an aside, I also really like the fact that this business treats its employees well by distributing a proportion of profit to them on an equal basis (£13m in 2020/21). I’m convinced that incentivised workers will be more inclined to take pride in what they do and push for the company to succeed.

Economic moat

Third, it’s a clear leader in a very niche market where fans tend to stick around for years and years.

It’s this ‘economic moat’ (to quote Warren Buffett) that tends to separate winning stocks from the also-rans. It also made the valuation of 19 times forecast earnings at the time I began buying look a steal, at least in my opinion.

No sure thing

It goes without saying that I have absolutely no idea where the Games Workshop share price is headed in the near term. It could very easily go lower if the economic pain wrought by inflation gets worse.

As much as I need to take this possibility seriously, I’m not fazed by it. Being a successful investor requires commitment, not precise timing. I’ll leave the latter to the day traders in the City.

Regardless of what happens next, I’m being paid to wait for a recovery anyway. Analysts have the company yielding 3.2% in FY23. That’s worth a bit of short-term pain, in my opinion.

The post 1 irresistible FTSE growth stock I’ve been buying in July appeared first on The Motley Fool UK.

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Paul Summers owns shares in Games Workshop. The Motley Fool UK has recommended Games Workshop. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.