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Video games Workshop (LSE:GAW) is without doubt one of the top-performing FTSE 100 shares of 2025. Regardless of not being a synthetic intelligence (AI) firm, the inventory’s up 46% for the reason that begin of January.
The rising share worth has been pushed by the agency’s capacity to maintain producing robust gross sales progress in a tricky setting. And that improve isn’t even the complete story…
Dividends
That 46% rise means a £5,000 funding from the beginning of the 12 months now has a market worth of simply over £7,430. However the firm has additionally returned £5.40 in dividends per share in 2025.
Primarily based on the share worth at the beginning of January, that’s a further return of simply over 4%. Within the context of a £5,000 funding, that’s barely greater than £210. In different phrases, buyers have had a complete return of simply over 50% this 12 months. Most of it has come from the share worth going up, however the agency has additionally returned money on to buyers.
Can this proceed in 2026? I personal the inventory and whereas I’m not anticipating the same consequence subsequent 12 months, I’m anticipating it to do higher than the FTSE 100 common.
Valuation
One purpose the worth has gone up is to do with valuation, quite than the underlying enterprise making extra money. At first of the 12 months, it traded at a price-to-earnings (P/E) ratio of 25.
The shares now commerce at a P/E a number of of 33. By itself, that change implies a 33% improve within the share worth and it displays investor expectations quite than the corporate itself.
This is without doubt one of the causes I’m not anticipating comparable positive aspects in 2026. One other 33% improve within the P/E ratio would imply the inventory buying and selling at a a number of of 44, which might be very excessive.
The inventory hasn’t traded at that degree within the final 5 years. That’s to not say it will possibly’t try this sooner or later, however I feel it’s unwise to base an funding on the expectation that it’ll.
Development
If I’m proper, then future share worth will increase are going to have to return from the underlying enterprise. And Video games Workshop has been doing nicely. In its most up-to-date replace, the agency reported a 15% improve in core gross sales and a 6% improve in pre-tax earnings. Within the context of the final 12 months, I feel that’s fairly spectacular.
The most important dangers to Video games Workshop embody tariffs, weak client spending, and inflation above goal charges. And just about all of those have been a characteristic of the final 12 months.
These are ongoing challenges for the enterprise. But when buying and selling circumstances begin to enhance, then progress charges may proceed to rise from their already spectacular ranges.
Purchase?
Video games Workshop’s been an excellent enterprise for buyers. Rising gross sales whereas returning money to shareholders is spectacular – doing it in a 12 months like this one is excellent.
In consequence although, the funding equation’s modified a bit. I believed it seemed a fantastic alternative at a P/E ratio of 25, however I’m much less satisfied at 33.
I don’t suppose it’s overvalued, essentially, however it’s not my prime FTSE 100 inventory with 2026 on the horizon. So I’m sticking with the shares I’ve and different alternatives.
