Should You Think About Buying Watches of Switzerland Group plc (LON:WOSG) Now?

Watches of Switzerland Group plc (LON:WOSG), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the LSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Watches of Switzerland Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Watches of Switzerland Group

Is Watches of Switzerland Group still cheap?

Watches of Switzerland Group appears to be overvalued by 28% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£10.28 on the market compared to my intrinsic value of £8.04. This means that the opportunity to buy Watches of Switzerland Group at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Watches of Switzerland Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Watches of Switzerland Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Watches of Switzerland Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? WOSG’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe WOSG should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on WOSG for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for WOSG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for Watches of Switzerland Group you should know about.

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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.
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