While shareholders of Swatch Group (VTX:UHR) are in the red over the last five years, underlying earnings have actually grown

The Swatch Group AG (VTX:UHR) shareholders should be happy to see the share price up 13% in the last quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 32%, which falls well short of the return you could get by buying an index fund.

The recent uptick of 5.9% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for Swatch Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

While the share price declined over five years, Swatch Group actually managed to increase EPS by an average of 7.0% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.

It could be that the revenue decline of 4.3% per year is viewed as evidence that Swatch Group is shrinking. That could explain the weak share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Swatch Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Swatch Group's TSR for the last 5 years was -24%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While it's never nice to take a loss, Swatch Group shareholders can take comfort that , including dividends,their trailing twelve month loss of 2.9% wasn't as bad as the market loss of around 9.0%. What is more upsetting is the 4% per annum loss investors have suffered over the last half decade. While the losses are slowing we doubt many shareholders are happy with the stock. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Swatch Group is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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