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Many buyers could say the clock could also be ticking on Watches of Switzerland (LSE:WOSG) shares as a gorgeous funding. This luxurious watch retailer has seen its share worth plummet almost 38% over the previous yr, considerably underperforming each its business friends and the broader UK market. However does this current a golden alternative for savvy buyers? Let’s take a better look.
Out of time?
The corporate operates as a retailer of luxurious watches and jewelry within the UK, Europe, and the US. Whereas the enterprise boasts a powerful heritage relationship again to 1775, its latest efficiency has been lower than stellar.
The agency’s revenue margins have taken a big hit, dropping from 7.9% final yr to only 3.8% in the newest report. This compression in profitability is a crimson flag that shouldn’t be ignored. Moreover, the corporate’s share worth has proven excessive volatility, falling a large 37% in a single day again in January after releasing a revenue warning.
Most worrying for me, a discounted money stream (DCF) evaluation suggests the corporate is already overvalued by an unbelievable 287%. That is admittedly only one metric, however with buyers already down considerably for the yr, I’d be nervous about additional difficulties forward.
Indicators of optimism
Nonetheless, it’s not all dangerous information for Watches of Switzerland. The corporate’s price-to-earnings (P/E) ratio of 16.3 occasions is barely beneath the UK market common of 16.7 occasions, suggesting it might be buying and selling at a good worth in comparison with its friends. Moreover, analysts are forecasting wholesome earnings progress of 17.35% per yr.
The corporate additionally seems to be in good monetary well being, with more money than debt. This strong basis may assist the agency climate short-term storms and place itself for future progress.
The analyst neighborhood appears divided on Watches of Switzerland’s prospects. The shares at present have a ‘moderate buy’ consensus score, primarily based on 6 ‘buy’ scores and three ‘hold’ scores from analysts over the previous three months. The typical worth goal of 486.38p represents a possible progress of almost 18% from the present share worth.
Nonetheless, it’s price noting that some analysts have not too long ago lowered their worth targets. Financial institution of America Securities, as an illustration, decreased their goal from 700p to 650p whereas sustaining a ‘hold’ score.
One to look at
So, is time up for Watches of Switzerland shares? Whereas the corporate faces vital challenges, together with compressed margins and a difficult macroeconomic surroundings, it’s maybe too quickly to name time on this luxurious retailer.
Regardless of some blended scores and valuations, the agency’s sturdy stability sheet and projected earnings progress counsel there should be life within the previous timepiece but. Nonetheless, potential buyers ought to concentrate on the dangers, together with the corporate’s latest underperformance and share worth volatility.
So whereas the Watches of Switzerland share worth should have some ticks left in it, solely time will inform if it could regain its lustre as a standout funding within the UK market. I’ll be including it to my watchlist for now.
