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Watches of Switzerland Group PLC (LON:WOSG) shareholders might understandably be very concerned that the share price has dropped 38% in the last quarter. On the other hand the returns over the last half decade have not been bad. It's good to see the share price is up 64% in that time, better than its market return of 63%. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 61% decline over the last three years: that's a long time to wait for profits.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
We've discovered 2 warning signs about Watches of Switzerland Group. View them for free.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years of share price growth, Watches of Switzerland Group moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Watches of Switzerland Group's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Watches of Switzerland Group has rewarded shareholders with a total shareholder return of 5.0% in the last twelve months. Having said that, the five-year TSR of 10% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Watches of Switzerland Group , and understanding them should be part of your investment process.
Watches of Switzerland Group is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.