£5,000 buys 31 shares in this 39% CAGR growth stock!

The British stock market’s filled with tremendous growth opportunities. Despite a lack of technology stocks, smart investors who can spot winning businesses can still unlock tremendous returns. And that’s certainly been the case for anyone who decided to snap up shares in Games Workshop (LSE:GAW) back in 2015.

Over the last decade, the niche tabletop hobby business has cultivated some enormous pricing power among its customer base.

That’s translated into a continuous stream of rising revenue and earnings that have pushed the share price to record highs. And when including the extra gains from dividends, shareholders have reaped a staggering 2,654% return, or 39.3% on an annualised basis. Just to put this into perspective, a £5,000 investment in August 2015 is now worth £137,868!

So should investors be thinking about buying £5,000 worth of shares today?

An untapped growth avenue?

Looking at its latest results, management’s long-term strategy of diversifying the revenue stream through licensing seems to be yielding fruit.

The massive success of Space Marine 2, developed by Saber Interactive, has generated an enormous wave of licensing revenue. However, more excitingly, the company also noted a significant boost to in-store foot traffic following the game’s release. In other words, by expanding into other media channels, the company isn’t just earning licensing income, but attracting new players to the core Warhammer hobby as well.

That’s an encouraging sign given the recent partnership signed with Amazon to develop a fully-fledged TV series. And just like gaming, streaming has an enormous audience that could attract new players and collectors into the Warhammer hobby.

Managing expectations

The recent licensing success ultimately helped push both revenue and earnings to yet another all-time high. But with no similar-scale video game releases planned for 2026, and the Amazon show still several years away, the company could soon be facing some tough comparables that may test the growth stock’s premium valuation.

It’s also important to recognise that should the TV show fail to resonate with audiences and receive poor reviews, the company could actually harm its brands rather than build them. And should the subsequent growth expectations fail to materialise, the company’s winning streak could come to an end.

In other words, just because Games Workshop has outperformed over the last decade, it doesn’t mean it will continue to do so moving forward.

The bottom line

All things considered, I think Games Workshop continues to offer impressive potential even in 2025. The Warhammer hobby is growing at a rapid pace and expanding beyond the boundaries of the tabletop. And while the high cost of its products could serve as a barrier to entry for newer players, so far it hasn’t stopped this business from dominating the hobby space.

Of course, as with all premium-priced growth stocks, volatility is to be expected. So investors will need to carefully consider whether this business lies within their personal risk tolerance.

The post £5,000 buys 31 shares in this 39% CAGR growth stock! appeared first on The Motley Fool UK.

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Zaven Boyrazian has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Amazon and Games Workshop Group Plc. 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.