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Games Workshop Group PLC (LON:GAW), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£77.70 and falling to the lows of UK£63.65. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Games Workshop Group's current trading price of UK£64.15 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Games Workshop Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Games Workshop Group
Is Games Workshop Group still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.66x is currently trading slightly above its industry peers’ ratio of 14.14x, which means if you buy Games Workshop Group today, you’d be paying a relatively sensible price for it. And if you believe Games Workshop Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Games Workshop Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Games Workshop Group generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Games Workshop Group's earnings over the next few years are expected to increase by 24%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? GAW’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GAW? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?