This top FTSE 100 growth share’s sinking! Is it a buying opportunity?

It’s not typically {that a} inventory drops after reporting forecast-beating buying and selling numbers. However Video games Workshop (LSE:GAW) — in my view the FTSE 100 best progress share — has accomplished simply that.

At £183.70 per share, the tabletop gaming large’s fallen 3% on Tuesday (13 January). Over the past month it’s now down roughly 6%, although revenues and income maintain beating expectations and money flows proceed to increase.

So what’s occurring with Video games Workshop’s share worth? And does current weak spot symbolize a helpful dip-buying alternative?

Sturdy outcomes

Not everyone seems to be aware of the FTSE firm’s operations, so let me present a one-line introduction. Video games Workshop is the worldwide chief in fantasy tabletop gaming — it designs, manufactures and sells video games techniques, miniatures, paints and equipment that hobbyists eagerly snap up.

Its share worth leapt to recent highs in December when it predicted core income of not less than £310m, and minimal licensing income of £16m, for the six months to November. It additionally tipped pre-tax revenue of not less than £135m.

At this time the Warhammer maker surpassed expectations once more. It introduced core income of £316m, up 17% yr on yr, and an 88% drop in licensing income to £16m. Licensing gross sales benefitted the yr earlier than from the blockbuster launch of its Area Marine II online game.

Nonetheless, an 11% rise in headline gross sales to £332.1m drove revenue earlier than tax to £140.8m. This was additionally up 11% yr on yr.

To high issues off, internet money leapt to £112.5m from £79.1m a yr earlier. Reflecting its robust efficiency, the enterprise introduced a 110p per share dividend, its sixth of the yr.

Valuation situation

Video games Workshop isn’t resistant to broader weak spot in shopper spending. However as at present’s outcomes present, its place as undisputed market chief in a distinct segment business gives it with beautiful resilience.

So why has the inventory dropped regardless of Tuesday’s outcomes? They have been nice, certain, however they weren’t excellent, with tariff-related prices coming in at £6m over the half yr.

Bills like this stay a risk given present US commerce coverage, and the actual fact Video games Workshop manufactures all its product right here within the UK.

The difficulty is that Video games Worksop shares look costly on paper, even after current weak spot. Its forward-looking price-to-earnings (P/E) ratio is 34 occasions. At these ranges, buying and selling numbers have a tendency to want to blow the doorways off.

Whereas undoubtedly wonderful, the market clearly thinks the FTSE agency hasn’t accomplished fairly sufficient to justify that valuation at present. Its beautiful share worth rise across the finish of final yr has additionally seen buyers pause for thought.

Is Video games Workshop a Purchase?

On stability, then, are Video games Workshop shares a Purchase for me proper now? My private view is sure — I really topped up my holdings within the firm final week.

Whereas it’s dear on paper, I feel the FTSE 100 inventory is totally worthy of a premium valuation and is one to think about. It stays in pole place to capitalise on the booming fantasy gaming market. And plans to step up licensing of its red-hot Warhammer IP with the likes of Amazon may unleash an thrilling new progress part.