Shareholders in Swatch Group (VTX:UHR) have lost 31%, as stock drops 5.4% this past week

The Swatch Group AG (VTX:UHR) shareholders should be happy to see the share price up 13% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 37% in the last three years, significantly under-performing the market.

After losing 5.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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We don't think that Swatch Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last three years Swatch Group saw its revenue shrink by 5.5% per year. That's not what investors generally want to see. The annual decline of 11% per year in that period has clearly disappointed holders. And with no profits, and weak revenue, are you surprised? Of course, sentiment could become too negative, and the company may actually be making progress to profitability.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Swatch Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Swatch Group in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Swatch Group's TSR for the last 3 years was -31%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 3.9% in the last year, Swatch Group shareholders lost 14% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Swatch Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Swatch Group you should be aware of, and 1 of them makes us a bit uncomfortable.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swiss exchanges.

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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.