A rare buying opportunity in 1 of the UK’s top shares?

UK investors who invested £1,000 in Games Workshop (LSE:GAW) shares 10 years ago now have something worth £32,564. And that’s not including another £4,226 in dividends.

The company’s latest report indicates that it’s still going strong, but the stock has faltered so far in 2026. So is this a potential buying opportunity, or is something else going on?

A top-quality business

In a stock market that seems heavily interested in artificial intelligence (AI), Games Workshop can seem a bit, well, analogue! But its Warhammer merchandise is incredibly lucrative.

The company’s gross margins have consistently been around 70% over the last 10 years. That’s well above Alphabet, which is currently leading in the AI race. 

This is because the firm has a product that’s impossible to replicate (as far as that brand is concerned). And it’s important enough to its customers that they routinely show up to buy the latest releases. 

There’s always a risk that this could stall in a recession. But since 2020, the firm has grown its revenues at an average of 18% a year – well in excess of what Microsoft has managed. 

Why is the stock faltering?

Games Workshop has produced outstanding returns over the last 10 years. But it’s fallen 5% since the start of 2026 and I think there are a couple of reasons why. 

The latest update reported 11% growth in overall sales and earnings per share. The firm also announced a £1.10 per share dividend to be paid in May – a 10% increase on the previous year.

That’s a strong result, but it is slightly below where growth has been in previous years. On top of this, the stock is now much more expensive than it once was.

The rising share price means that Games Workshop shares now trade at a price-to-earnings (P/E) multiple of around 30. At that level, the stakes are very high. If growth starts to slow, investors can show their disappointment and the stock can fall. 

A buying opportunity?

Games Workshop’s revenue growth might have faltered slightly (though a lot of companies would be very pleased with 11%). But its core competitive strengths are still firmly intact. 

There’s no competitor capable of (legally) replicating its intellectual property. And the firm’s relentless focus on its product and its customers is easily overlooked, but it’s a huge asset.

It’s clearly a quality business, but the question is whether it’s a good investment. On that front, despite the share price coming down and earnings going up, I still think it looks a little expensive.

The stock is the largest investment in my ISA, but I bought it when it was trading at a P/E ratio of 22. I think it’s good value at that multiple, but 30 isn’t quite cheap enough for me.

Sensible investing

Falling share prices can be an opportunity. And it hasn’t happened often with Games Workshop in the recent past, so it’s worth looking to see what’s going on. 

Stocks, however, aren’t good value because they’re less expensive than they were the day before. They can go from being very expensive to merely expensive.

I think that’s what has been happening with Games Workshop. The quality of the business means I’m not selling my shares, but I’m looking elsewhere from a buying perspective.

The post A rare buying opportunity in 1 of the UK’s top shares? appeared first on The Motley Fool UK.

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Stephen Wright has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Alphabet, Games Workshop Group Plc, and Microsoft. 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.

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