Shares for the future: the highest quality business I follow

For the ninth consecutive year, none of the numbers I use to measure a company's performance and financial strength cause obvious concern at Games Workshop Group (LSE:GAW). It is prodigiously profitable, cash generative and has grown strongly.

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Seven per cent revenue growth and 5% profit growth in the year to May 2026 were well below par, but there is probably nothing to worry about.

A tale of two revenue streams

Games Workshop has two primary revenue streams: core revenue mainly from selling Warhammer fantasy miniatures, model soldiers and armies that hobbyists paint, collect, and play tabletop wargames with, and licensing revenue.

It controls most aspects of “The Hobby” that provides core revenue. Games Workshop has just built its fourth factory in Nottingham, where it makes miniatures. The lore, a vast collection of stories, is propagated in hundreds of novels, rule books and magazines its imprints publish. Five hundred and ninety eight Warhammer stores are hubs for hobbyists, who paint, play and shop there. Many more independent hobby stores stock Warhammer. They and Games Workshop sell Warhammer online.

The lore is Games Workshop's intellectual property. Hobbyists pass it on by word of mouth when they meet up, and virally on social media.   

Licensing income is the icing on the cake. Mainly this comes from video game makers, who publish titles based on the lore. Beyond the terms of the licenses and which companies it contracts with, Games Workshop has little control over development and launch schedules. It is a very profitable business, but also lumpy.

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For the core, it was business as usual in 2026. Core revenue grew 11%, just below the 12% compound annual growth rate (CAGR) Games Workshop has achieved since 2021. Core operating profit increased 16%, above its five-year CAGR, which is also 12%.

I think this was a good performance because the company did not launch a new edition of either of its two main tabletop games in 2027. New editions change the rules and mechanics of the games and introduce new storylines and characters to keep things interesting for gamers. Naturally, the company creates a buzz and stimulates demand for miniatures.

Video games, films and TV

The big news in recent years has been a film and TV deal signed two years ago with Amazon. This year’s annual report repeats last year's in saying it will take years to bring these adaptations to screens.

Amazon has brought in studio United Artists to make the films and programmes. It will be working with the lead actor, executive producer, Warhammer enthusiast and long-time champion of the project, Henry (Superman) Cavill.

Amazon is also producing an animated series based on Warhammer 40,000, the most popular of Games Workshop’s two imaginary universes. The series is a spin-off of Secret Level, an adult animation series that has already featured Warhammer.

Film and TV projects are mostly jam tomorrow. Most licensing revenue today comes from video games.      

Licensing revenue fell 37% in 2026, but in 2025 licensing revenue increased 69%. That year was exceptional due to the launch of Space Marine 2, a massive commercial hit for publisher Focus Entertainment. Space Marines are, perhaps, Warhammer 40,000's most popular faction.

Source: Games Workshop annual reports

In last year's annual report Games Workshop said Space Marine 2 would be a hard act to follow. Nevertheless, revenues from past titles and two new video games meant Games Workshop received more licensing revenue than in any other year in my chart.

Focus has Space Marine 3 in the works, but it is reportedly years away, and four more new video game titles were announced in 2026. A reader has high expectations for Warhammer 40,000: Dawn of War IV, which will be launched in December.

The release of the eleventh edition of Warhammer 40,000 in June 2026 should help the core business to grow again in the current financial year, along with, perhaps, more license income.                                               

Scoring Games Workshop: Self reliance

It is hard not to like Games Workshop. Underneath the three-yearly edition cycles, and the near continuous flow of intermediate releases is a well-oiled manufacturing, design, publishing, and marketing machine.

Kevin Rountree enjoys confessing to occasional, but generally low impact, whoopsies in the annual report. This year it was the operational directors that took the flack. Games Workshop has achieved 102 months of year-on-year growth out of the 120 months in the last financial decade, and it failed to grow in two months in 2026:

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"One was in January 2026 due to snow fall at our distribution hub in Memphis (the team were amazing - picking the held sales orders in a few days once the snow was cleared). The other one this year was in May 2026, we missed by £1.5 million, that still hurts. That was due to a poor execution of our plan in the final week of the year. The operational directors were distracted by the detailed planning for the launch of the 11th edition of Warhammer 40,000 in June 2026. But still, no excuses, lessons have been learnt."

Impressively the growth has been steady across all main regions:

The company's self-reliance extends to staff. The first of six priorities for the new financial year is staff training and recruitment. Games Workshop says it has high retention rates, probably because many employees are hobbyists and there are opportunities to flourish. It says it recruits for attitude over skills. As befitting its aim to recruit internally for all senior roles, its three executives were all promoted to their current posts.

In the past, I have worried that Games Workshop's resistance to outside influence could under certain circumstances be a weakness. My interest in the company was forged under previous management when customers, particularly gamers, were in open rebellion on the internet about ever-more elaborate and pricey models and neglect of the game.

Customers are evidently at the centre of Games Workshop's strategy now, so this year I have belatedly given Games Workshop a perfect score for quality. It is, I think, the highest quality business I follow.

30 Shares for the future

Here is the ranked list of Decision Engine shares. I review the scores at least once a year, soon after each company has published its annual report. The price scores are calculated using the share price prior to publication.

Generally, I consider shares that score more than 5 out of 10 to be worthy of long-term investment in sizes determined by the ideal holding size (ihs%).

Cohort, Goodwin and Jet2 have published annual reports and are due to be re-scored. Having agreed to a takeover, Advanced Medical Solutions is soon to delist.

Click on a share’s score to see a breakdown (scores may have changed due to movements in share price). Key: qual is the share’s score out of 9 for the three quality factors (capabilities, risks, and strategy), price is the price score from -3 to +1, and ih% is the suggested ideal holding size as a percentage of the total value of a diversified portfolio.

Richard Beddard is a freelance contributor and not a direct employee of interactive investor. 

Richard owns Games Workshop and many shares in the Decision Engine. He weights his portfolio so it owns bigger holdings in the higher-scoring shares.

For more on the Decision Engine and Share Sleuth, please see Richard’s explainer.

Contact Richard Beddard by email: richard@beddard.net or on Twitter: @RichardBeddard