Does the Watches of Switzerland Group (LON:WOSG) deserve a spot on your watchlist?
For beginners, it can be a good idea (and an exciting prospect) to buy a company that has a good story to tell investors, even if it lacks a track record of sales and profits. But the reality is that if a company loses money for long enough each year, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable, growing businesses, such as Swiss Group Watches (LON:WOSG). Even if stocks are fully valued today, most capitalists would take their gains as evidence of steady value creation. Conversely, a loss-making company has yet to prove itself at a profit, and at some point the sweet milk of outside capital may turn sour.
Check out our latest analysis for the Watches of Switzerland Group
How fast is the Watches of Switzerland Group growing?
If you believe markets are anything remotely efficient, then over the long term you would expect a company’s stock price to track its earnings per share (EPS). That makes EPS growth an attractive trait for any company. Impressively, the Watches of Switzerland Group has grown EPS by 32% annually over the past three years. If the company can sustain this kind of growth, we expect shareholders to emerge victorious.
I like to look at earnings before interest and tax (EBIT) margin and revenue growth to get a further sense of the quality of the company’s growth. The good news is that Watches of Switzerland Group is growing sales and improving EBIT margins by 2.6 percentage points to 12% over the past year. That’s great to see on both counts.
In the chart below, you can see the company’s revenue and earnings growth trend. Click on the chart to see the exact numbers.
The trick as an investor is to find companies that are go to perform well in the future, not just in the past. To that end, you can check our visualization of consensus analyst forecasts for Watches of Switzerland Group future EPS 100% free right now and today.
Do Watches of Switzerland Group insiders agree with all shareholders?
I like it when business leaders have a stake, so to speak, because it improves the alignment of incentives between the people running the business and its true owners. So it’s good to see that Watches of Switzerland Group insiders have invested a significant amount of capital in the stock. Given that insiders own a small fortune in shares, currently valued at £74 million, they have plenty of motivation to make the company a success. This should allow them to focus on creating long-term value for shareholders.
It means a lot to see insiders invested in the company, but I wonder if the compensation policy is shareholder-friendly. A brief analysis of CEO compensation suggests that this is the case. I found that the average total pay for CEOs of companies like Watches of Switzerland Group with market caps between £1.6bn and £5.1bn is around £2.3m.
The Watches of Switzerland Group CEO received £1.2 million in compensation for the financial year that ended. That’s below average for companies of a similar size and seems pretty reasonable to me. CEO pay is hardly the most important aspect of a company to consider, but when it’s appropriate, it gives me a little more confidence that leadership has shareholder interests in mind. It can also be a sign of good governance in general.
Does the Watches of Switzerland Group deserve a place on your watch list?
Given my belief that the stock price tracks earnings per share, you can easily imagine how I feel about Watches of Switzerland Group’s strong EPS growth. If you need more persuasion beyond that EPS growth rate, don’t forget the decent compensation and high insider ownership. Each to their own, but I think all of this makes the Watches of Switzerland Group look pretty interesting indeed. We should say we discovered it 1 warning label for Watches of Switzerland Group you should know before you invest here.
While Watches of Switzerland Group looks good to me, I would prefer insiders to buy shares. If you also want to see insider buying, then here free List of Growing Companies Who Buy Insiders might be just what you’re looking for.
Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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