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Watches of Switzerland Group plc (LON:WOSG) shareholders might be concerned after seeing the share price drop 21% in the last quarter. But in three years the returns have been great. In three years the stock price has launched 144% higher: a great result. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.
Although Watches of Switzerland Group has shed UK£80m from its market cap this week, let’s take a look at its longer term fundamental trends and see if they’ve driven returns.
Check out our latest analysis for Watches of Switzerland Group
SWOT Analysis for Watches of Switzerland Group
- Earnings growth over the past year exceeded the industry.
- Debt is not viewed as a risk.
- Earnings growth over the past year is below its 5-year average.
- Annual earnings are forecast to grow faster than the British market.
- Good value based on P/E ratio and estimated fair value.
- Revenue is forecast to grow slower than 20% per year.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Watches of Switzerland Group became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Watches of Switzerland Group’s earnings, revenue and cash flow.
A Different Perspective
Watches of Switzerland Group shareholders are down 25% for the year, but the broader market is up 2.9%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 35% per year over three years. Sometimes when a good quality long term winner has a weak period, it’s turns out to be an opportunity, but you really need to be sure that the quality is there. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Watches of Switzerland Group by clicking this link.
Watches of Switzerland Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
Valuation is complex, but we’re helping make it simple.
Find out whether Watches of Switzerland Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
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