Swatch Group (VTX:UHR) Has More To Do To Multiply In Value Going Forward

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Swatch Group (VTX:UHR) and its ROCE trend, we weren't exactly thrilled.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Swatch Group:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.014 = CHF170m ÷ (CHF14b - CHF1.2b) (Based on the trailing twelve months to June 2025).

Thus, Swatch Group has an ROCE of 1.4%. Ultimately, that's a low return and it under-performs the Luxury industry average of 13%.

See our latest analysis for Swatch Group

In the above chart we have measured Swatch Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Swatch Group for free.

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at Swatch Group, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Swatch Group to be a multi-bagger going forward. That being the case, it makes sense that Swatch Group has been paying out 85% of its earnings to its shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

The Key Takeaway

We can conclude that in regards to Swatch Group's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 23% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Swatch Group has the makings of a multi-bagger.

On a final note, we found 2 warning signs for Swatch Group (1 is significant) you should be aware of.

While Swatch Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.