December 1, 2023
3 ‘nightmare’ FTSE 100 value traps I wouldn’t buy with free money

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it’s been a great five years Sports Workshop (LSE:GAW) as shareholders FTSE 250 The company has achieved 260% returns this month. And this figure doesn’t even include additional profits from dividends paid over the past few years.

For a business selling plastic miniatures for the wargaming tabletop hobby, this performance is undoubtedly impressive. Still, judging by its latest results, the growth story is far from over. So is now the right time to buy more shares? let’s take a look.

The power of curious customers

On the surface, various warhammer Franchises seem like a stupid hobby. And while there is some truth to this, it has proven to be highly addictive. To such an extent that hobbyists eagerly wait to purchase the latest box sets and models, creating a cult-like following among customers.

Evidence of this behavior was demonstrated precisely earlier this year when Games Workshop released leviathan Boxset for the launch of the 10th edition warhammer 40,000, It sold out within two days in the UK and within a week worldwide.

The financial results of this release were evident in the following trading update. Games Workshop reported record sales and profits, well ahead of expectations. And it might have happened again.

On November 11th, 10 Christmas Battleforce Boxes warhammer 40,000 And Warhammer Age of Sigmar Made available for pre-order, priced at £135-£140 each. They too were sold out within a few hours.

Given that the economic environment around the world is still on the mend and the UK is struggling with a cost of living crisis, the loyalty is that warhammer Brand command is extraordinary. And with a steady stream of new miniatures, books, TV shows, and licensed video games planned over the next year, new and existing customers will have plenty of excuses to start buying more.

an expensive appraisal

While not every investor is a warhammer While enthusiastic, the quality of this FTSE 250 business has not gone unnoticed. Thus, shares trade at a slight premium. And a quick look at the group’s price-to-earnings (P/E) ratio of 27 times proves this.

In my opinion, given management’s habit of exceeding expectations and the seemingly endless demand for its products, such a price tag may be justified. However, like any growth stock, high valuations invite high levels of volatility.

Overall, hobbyists seem comfortable paying the high price warhammer Miniatures. But as economic conditions worsen, customer spending may begin to deteriorate, hurting sales. This will be especially problematic if management does not correctly predict changes in demand, resulting in slow-moving inventory build-up.

Despite these risks, I think this stock remains a top pick in my portfolio. And I’m tempted to increase my investment based on cautious optimism for the future of the hobby and customer culture created by the brand.

Post up 260%! Should I invest in this rising FTSE 250 stock? appeared first on The Motley Fool UK.

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Zeven Boyarezian holds positions at Games Workshop Group PLC. The Motley Fool UK recommends Games Workshop Group PLC. The views expressed on the companies mentioned in this article are those of the author 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 wide variety of insights can make us better investors.

Motley Fool UK 2023


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