I’m searching the FTSE 250 for the next generation of stock market heavyweights. My research has led me to conclude that Games Workshop (LSE:GAW) and Greggs (LSE:GRG) could be bound for the FTSE 100.
Greggs has more that doubled in value during the past five years. And Games Workshop has soared an impressive 275% over the period. The latter now has a market capitalisation above that of Hargreaves Lansdown (£3.4bn), which is now the Footsie’s least-valuable company.
Games Workshop
It’s astonishing to think that a niche business like Games Workshop could possibly end up in the FTSE 100. But this £3.5bn cap business is a leader in its field and is sitting pretty as its fantasy miniatures hit the mainstream.
The company is best known for its Warhammer 40,000 tabletop gaming system and its products attract a cult following. Most of us may not know our Space Marine from our Blood Angel, but its rich world of characters attracts a huge legion of fans who regularly spend small fortunes to build, paint, and then battle with their miniature plastic armies.
Sales are taking off across the globe as the fantasy genre steadily grows and Games Workshop builds its global footprint. Thanks to successful product rollouts like its Leviathan box set — a product that sold out within hours of release — group revenues roared to a better-than-expected £127m in the three months to 27 August. This was up 17% year on year.
Excitingly, the Warhammer maker is in talks with Amazon to create programming based on its intellectual property. The move could be a gamechanger for the company by boosting its brand, turbocharging its licensing revenues and lifting sales of its gaming systems and other merchandise.
The gaming industry is highly competitive, while the growing popularity of 3D printing poses another threat. Yet I still believe Games Workshop has the right recipe to continue rapidly growing sales.
Greggs
Who doesn’t enjoy a hot cup of tea and a doughnut? It’s a love affair that means food-to-go chain Greggs remains a big winner despite the tough economic climate.
The firm also sells its products at reasonable prices, a strategy that helped like-for-like sales at company-managed shops leap 14.2% during the 13 weeks to 30 September.
I think Greggs could become a stock market giant as it expands its store network to supercharge sales. The firm opened 82 net new shops just in the first nine months of 2023.
The £2.6bn cap company has ambitions to have a store estate comprising “significantly more than 3,000 shops.” That’s up from around 2,400 today. I’m especially encouraged by its plan to boost its presence in travel locations like railway stations as well as retail parks, too, places where it has a huge addressable market.
I like the fact that Greggs has a strong balance sheet to help it execute its growth programme. It had cash and cash equivalents of £138.6m as of June. High cost inflation may remain a problem, as may potential supply chain disruptions. But on balance I think the earnings outlook here is very promising.
The post 2 FTSE 250 shares I think are destined for the FTSE 100! appeared first on The Motley Fool UK.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Amazon, Games Workshop Group Plc, and Hargreaves Lansdown Plc. Views expressed on the companies mentioned in this article are those of the writer 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 diverse range of insights makes us better investors.
