Critical Analysis: Swatch Group (OTCMKTS:SWGAY) and RH (NYSE:RH)

RH (NYSE:RH) and Swatch Group (OTCMKTS:SWGAY) are both consumer staples companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, analyst recommendations and dividends.

Volatility and Risk

RH has a beta of 2.19, meaning that its share price is 119% more volatile than the S&P 500. Comparatively, Swatch Group has a beta of 0.77, meaning that its share price is 23% less volatile than the S&P 500.

Insider and Institutional Ownership

90.2% of RH shares are owned by institutional investors. 27.0% of RH shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares RH and Swatch Group”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RH	$3.18 billion	1.12	$72.41 million	$4.20	45.47
Swatch Group	$7.65 billion	2.50	$219.26 million	N/A	N/A

Swatch Group has higher revenue and earnings than RH.

Profitability

This table compares RH and Swatch Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RH	2.57%	-67.71%	2.60%
Swatch Group	N/A	N/A	N/A

Analyst Recommendations

This is a summary of current ratings for RH and Swatch Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RH	3	4	9	0	2.38
Swatch Group	4	0	0	0	1.00

RH currently has a consensus target price of $271.56, suggesting a potential upside of 42.20%. Given RH’s stronger consensus rating and higher probable upside, research analysts clearly believe RH is more favorable than Swatch Group.

Summary

RH beats Swatch Group on 8 of the 12 factors compared between the two stocks.

About RH

RH, together with its subsidiaries, operates as a retailer in the home furnishings market. The company offers products in various categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, baby, child, and teen furnishings. It provides its products through rh.com, rhbabyandchild.com, rhteen.com, rhmodern.com, and waterworks.com online channels, as well as operates RH Galleries, RH outlet stores, RH Guesthouse, and Waterworks showrooms in the United States, Canada, the United Kingdom, and Germany. The company was formerly known as Restoration Hardware Holdings, Inc. and changed its name to RH in January 2017. RH was incorporated in 2011 and is headquartered in Corte Madera, California.

About Swatch Group

The Swatch Group AG designs, manufactures, and sells finished watches, jewelry, and watch movements and components worldwide. The company operates through Watches & Jewelry and Electronic Systems segments. The Watches & Jewelry segment designs, produces, and commercializes watches and jewelry. The Electronic Systems segment engages in the design, production, and commercialization of electronic components, as well as sports timing activities. It is also involved in the provision of assembly, research and development, administration, polishing, logistics and distribution, and customer services; and hard material products, microelectronics, watch cases and crowns, miniature low-frequency quartz crystals, thin wires, miniature batteries, watch dials, watch hands, bracelets, sports timing technology and equipment, precision parts, and assembly electronic components. In addition, the company engages in retail, communication, real estate, real estate management, finance, reinsurance, and art center businesses. It offers its watch and jewelry products primarily under the Breguet, Harry Winston, Blancpain, Glashütte Original, Jaquet Droz, Léon Hatot, Omega, Longines, Rado, Union Glashütte, Tissot, Balmain, Certina, Mido, Hamilton, Swatch, and Flik Flak brands. The Swatch Group AG was founded in 1983 and is headquartered in Biel/Bienne, Switzerland.