If EPS Growth Is Important To You, Watches of Switzerland Group (LON:WOSG) Presents An Opportunity

It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Watches of Switzerland Group (LON:WOSG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Watches of Switzerland Group

Watches of Switzerland Group’s Improving Profits

Over the last three years, Watches of Switzerland Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn’t particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Watches of Switzerland Group’s EPS skyrocketed from UK£0.31 to UK£0.48, in just one year; a result that’s bound to bring a smile to shareholders. That’s a fantastic gain of 56%.

It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. Watches of Switzerland Group maintained stable EBIT margins over the last year, all while growing revenue 32% to UK£1.4b. That’s progress.

The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we’ve got access to analyst forecasts of Watches of Switzerland Group’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Watches of Switzerland Group Insiders Aligned With All Shareholders?

It’s said that there’s no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell Watches of Switzerland Group shares in the last year. Even better, though, is that the Independent Non-Executive Chairman, Ian Carter, bought a whopping UK£198k worth of shares, paying about UK£7.62 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.

The good news, alongside the insider buying, for Watches of Switzerland Group bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a significant chunk of shares, currently valued at UK£64m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Does Watches of Switzerland Group Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Watches of Switzerland Group’s strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. These things considered, this is one stock worth watching. If you think Watches of Switzerland Group might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

The good news is that Watches of Switzerland Group is not the only growth stock with insider buying. Here’s a list of them… with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.