Introduction
Swatch
Group has previously been covered on this blog – first on June 7th, 2020, and then again on April 25th, 2021, when it was
highlighted as an opportunity to sell the stock at a decent gain, less than a
year after the initial write-up.
Since then,
the company has experienced some turbulence. Sales have weakened, culminating
in a disappointing 2024 financial year
with a notably low operating profit. Meanwhile, governance issues, particularly surrounding CEO Nick Hayek, who also represents the
company’s largest shareholder group, have drawn negative attention. The
combination of operational underperformance and management criticism has driven
the share price down to below CHF 27,
a stark decline from over CHF 90 in
2018.
Valuation
Despite these headwinds, Swatch’s balance sheet remains strong. As of the end of 2024, the company holds:
- CHF 1+ billion in cash
- CHF 7.6 billion in inventory
- CHF 3.1 billion in property, plant, and equipment
- Virtually no financial debt
This
results in total equity of over CHF 12
billion, while the market capitalization currently stands at
approximately CHF 6.9 billion.
This implies a price-to-book (P/B)
ratio of just 0.57x, which appears quite low for a company with a
globally recognized brand portfolio. Of course, current profits are depressed,
and a turnaround will be needed to unlock value.
What's next?
The numbers
are weak, governance is contentious, and many investors have lost patience –
leading to selling pressure. That said, Swatch
remains financially sound, with high autonomy thanks to its debt-free
structure. From a valuation standpoint, the stock looks cheap.
Could
investor sentiment turn? It’s possible. A shift in consumer perception or
improved profitability might drive renewed interest. Furthermore, rumors persist that the Hayek family pool, the largest
shareholder, may look to increase its
stake or even consider taking
the company private – a scenario that would certainly change the game.
Current Price
CHF 26.47 per
registered share
