When Usain Bolt sprinted to victory in the 100 meters at the London Olympics earlier this month, his time was revised down by one-hundredth of a second to 9.63 seconds by Omega, the official timekeeper for the games since 1948.

Omega, which reportedly pays around $20 million a year for its Olympic sponsorship, hopes that precision isn't lost on the worldwide audience of two billion who watched the race. Investors might want to pay attention, too.

Swatch Group (ticker: UHR.Switzerland), parent of the storied Omega brand, has reason to believe that its Olympic money was well spent. Following the 2008 Beijing games, Swatch Group's share of the Chinese watch market jumped to about 53% from 45%. Omega will make up a quarter of Swatch's China sales this year. The average selling price for its watches there has nearly tripled, to $17,000, since 2005, according to Berenberg Bank.

That's a fairly moderate price when it comes to luxury watches. Though best known for its inexpensive plastic watches, Swatch also owns the Breguet and Blancpain brands, which retail many timepieces for above $300,000.

Swatch Group, now the world's biggest watchmaker by sales, got its start 30 years ago, when Swiss watchmakers were under attack by inexpensive quartz watches from Asia—notably Japan's Seiko, Casio, and Citizen. Many companies were brought to their knees, among them ASUAG and SSIH, owner of the Omega brand.

Bankers brought in Nicolas Hayek, a management consultant and former actuary, to develop a strategy for the companies, including liquidation or sale to their Japanese rivals. Hayek took a different tack: He merged the businesses and fought back. He found the ammunition at ASUAG, where developers had conceived a slim-line watch that required only 51 components, a fraction of the number required by other watches. The ground-breaking assembly kept costs of the watches low. And the bright colors and playful pop-art styling made them an instant hit with consumers. The first Swatch watches hit the market in 1982, priced at less than $100. The affordable price and constant style changes—early Swatches featured designs by graffiti artist Keith Haring—led fashion-conscious consumers to collect a dozen or more, adding them to their wardrobes the same way they would add a new pair of shoes.

Hayek, who is widely credited with saving the Swiss watch industry, acquired a controlling stake in the company over time, and proceeded to take over the watch world.

Indeed, Swatch now manufactures some 80% of the movements for Swiss watches, based on volume, a situation that has become highly controversial in recent years.

Hayek died in 2010, but his family still controls about 48% of Swatch's shares. His son, Nick, has been CEO since 2003; daughter Nayla became chairman after Nicolas' death.

Nick Hayek continues to build on his father's legacy. "If I see two areas of risk, I see eight areas of opportunity," he said in a recent interview. Hayek wasn't available to respond to Barron's questions about the company.

IN THE FIRST HALF of 2012, Swatch's sales were up 14%, aided by expansion of its distribution and retail network. Net profit this year could reach $1.52 billion, or $27.81 a share—1.5 billion Swiss francs and CHF27.23, respectively. That's 50% higher than its pre-financial-crisis earnings in 2007. The shares, which trade on the Swiss Exchange, closed last week at CHF407, or 15 times this year's estimates. Net cash on the company's balance sheet is estimated at $2.75 billion. Swatch's market value is $21.9 billion.

Peers in the luxury space, like France's LVMH Moet Hennessy Louis Vuitton (MC.France) and Tiffany (TIF), trade at 18 times 2012 estimates. At a similar multiple, Swatch Group's shares would be worth CHF500, or about 25% higher.

In light of the events that led to the birth of the Swatch Group, it's ironic that the company's recent success is due in part to its solid foothold in the fast-growing Asian market. More than 50% of Swatch's sales come from Asia, compared with about one-third from Europe. The breadth of Swatch's product range in all price categories gives the company a degree of protection against tough times for consumers in China and elsewhere. Its penetration in Asia illustrates its potential to grow in other corners of the world. America currently accounts for less than 8% of sales, for example.

Swatch Group is opening new company-owned stores in North America, a strategy it is employing in other markets, too. Its own outlets account for about 15% of its distribution, compared with 10% just a few years ago. They could account for 17% to 18% of watch and jewelry sales this year and as much as 35% by 2016, Berenberg Bank predicts. Swatch doesn't disclose how many stores it operates or how many watches it sells.

The company also operates so-called monobrand boutiques for Omega, Breguet, Blancpain, Léon Hatot, and Jaquet Droz in New York, Tokyo, Paris, London, Beijing, and other major cities.

Sales through its own outlets allow the company to exercise greater control of its brands, offer better visibility on trends, and generate higher gross margins. Swatch's first-half operating profit margin was 24.5%, up from 23.7% a year ago, an indication that greater control of its retail and distribution network is paying off.

With $2.26 billion in sales last year, Omega is the company's top-selling brand, according to estimates by Berenberg Bank. That's almost triple the estimated sales of the company's low-end brands, Swatch and Flik Flak.

SWISS RIVALS HAVE COME to rely on Swatch Group for movements and other components. But as far back as 2002, it put rivals on notice that it would reduce the supply of low-cost parts to competitors. The move was designed to force them to invest more in manufacturing—and less in marketing—increasing the company's competitive advantage.

Swatch spends over $1 billion a year on marketing.

The move was protested by nine Swiss watchmakers, but last year a Swiss court rejected their appeal, allowing Swatch to cut back on sales of movements, albeit at a slower pace than Swatch Group wanted. The company will suffer a small loss of revenue in the short term, but in the long run it will be able to increase output for its own lines.

The upheaval could result in industry consolidation, which could present an opportunity for Swatch to spend some of its cash on another established brand, such as Breitling. "Swatch is in position to go from strength to strength," says David Winters, portfolio manager of the Wintergreen Fund (WGRNX), which has nearly 5% of its portfolio invested in the company. "It's a great company," he adds.

The company's shares are up 16% this year—and 210% since the 2009 stock-market bottom. Citing the reduced supplies to rivals and the success of its monobrand boutiques, analysts at Nomura think the shares could rise to CHF500 in a year. The consensus target is only slightly less bullish: CHF462.

With a strong emerging-market presence and a stable home currency, Swatch looks like an attractive way to play the world's rising middle class and gains in global wealth. One might be tempted to say that only time will tell, but for Swatch, it looks as if it already has.

BARRON'S