Here’s why Watches of Switzerland is a cheap retail stock to buy

July 17, 2023 10:10 PM AEST | By Invezz

Here’s why Watches of Switzerland is a cheap retail stock to buy — Image source: Invezz

Watches demand is strong

Watches of Switzerland is a leading retailer that sells watches mostly in the UK. It sells some of the leading brands like Rolex, Patek Philipe, Cartier, and Omega, among others. The company focuses mostly on used and brand-new watches.

A key theme in the watch industry recently is that used prices are tumbling while new price are rising. Rolex, the biggest luxury watch seller, has seen its demand surge in the past few months such that it is increasing production.

Meanwhile, on Monday, Richemont, the parent company of Cartier, said that demand for its products remained high. The company’s sales jumped by 19% in the second quarter. Most of this growth came from China, its fastest-growing market.

Watches of Switzerland published strong results last week. The retailer said that its revenue jumped to by 25% to £1.54 billion in the year to April. Most of this growth came from the United States, where revenue jumped by 52%.

Watches of Switzerland’s net profit before tax jumped by 23% to £155 million while its free cash flow soared to £146 million. This means that the company is relatively undervalued since it has a market cap of about £1.74 billion.

The valuation means that the company has a price-to-PBT ratio of ~11. This is a cheap valuation for a company that is still growing by more than 20% annually. Therefore, I suspect that the shares have more upside in the coming months from a fundamental standpoint. As such, together with JD Sports, I believe that WOSG is another good UK retail stocks to watch.

Watches of Switzerland share price

WOSG chart by TradingView

The daily chart shows that the WOSG stock price dropped to a low of 584p this month. It then staged a strong comeback that pushed it to 760p. The stock has moved above the 50-day and 25-day moving averages. It has also flipped the key resistance at 632p (September 29) into a support level.

Watches of Switzerland share price has moved above the 50-day and 25-day moving averages. The Relative Strength Index (RSI) has moved close to the overbought level. Therefore, the shares will likely continue rising as buyers target the next key resistance level at 900p, the highest point on May 2nd.

The post Here’s why Watches of Switzerland is a cheap retail stock to buy appeared first on Invezz.

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