Shares in FTSE 250 retailer Watches of Switzerland Group (LSE: WOSG) boomed through the pandemic, as watch collectors snapped up luxurious time items.

As one of many largest sellers of manufacturers equivalent to Rolex, Audemars Piguet and Breitling, the corporate was capable of promote all the luxurious watches it might pay money for.

The shares hit an all-time excessive of over 1,500p in January 2022, earlier than going sharply into reverse because the watch market slowed.

As I write, Watches of Switzerland’s share price is 390p. That’s 73% decrease than the report highs seen two-and-a-half years in the past. Is that this a shopping for alternative? Right here’s what I believe.

A golden alternative?

In my time as an investor, I’ve usually seen share costs overshoot as investor sentiment swings uncontrolled. First the shares go too excessive, after which they go too low. I believe this may very well be a kind of conditions.

Whereas market situations have actually bought harder for Watches of Switzerland since 2022, the corporate hasn’t been standing nonetheless. It has continued to open new outlets and rework current shops to enhance gross sales.

Administration have additionally made an enormous ($130m) acquisition of jewelry retailer Roberto Coin’s American oos, which is anticipated to spice up income.

It’s too quickly to say if this deal shall be profitable. However what we do know is that Watches of Switzerland’s buying and selling to this point this 12 months (Might-August) is consistent with dealer forecasts.

Luxurious watch and jewelry gross sales within the UK are mentioned to be stabilising after a troublesome interval final 12 months, when the corporate’s earnings fell by 28%.

“Demand for our key luxury brands” within the UK and US remains to be mentioned to be “outstripping supply”.

The corporate can also be persevering with its growth into the luxurious jewelry market, which might assist to broaden its buyer base.

What I’d do

The acquisition of Roberto Coin has left Watches of Switzerland with some debt. It’s additionally made the enterprise extra sophisticated, a minimum of for some time. This might add to the danger of economic issues, if the mixing of Roberto Coin doesn’t go as easily as deliberate.

Demand for luxurious items in different sectors of the market has additionally slowed, notably style. I assume there’s a danger that watches might see additional weak point too.

Nevertheless, on stability I believe these dangers are already priced into Watches of Switzerland’s £960m market cap.

I’m additionally excited by the expansion potential the enterprise has within the US. This can be a a lot bigger market than the UK.

At present ranges the shares commerce on a 2024/25 forecast price-to-earnings (P/E) ratio of 9.

Income are anticipated to proceed rising subsequent 12 months too. Dealer forecasts counsel the inventory may very well be buying and selling on simply eight instances 2025/26 forecast earnings.

That appears too low cost to me for a market-leading specialist retailer. If Watches of Switzerland can proceed to ship on forecasts, I reckon the shares might carry out nicely from right here and are value contemplating.