Garmin Ltd. (GRMN)

CAPS Rating:

A provider of navigation, communications and information devices, which are enabled by GPS technology. The Compny designs, develops, manufactures and markets a diverse family of hand-held, portable and fixed-mount GPS-enabled products.

View All Commentary (GRMN)

Recs

25

Avatar bluejonnyd (26.27) Submitted: 2/20/08 10:26 PM : Start Price: $65.30 GRMN Score: -28.18

Warren Buffet once said that "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Garmin, it seems, is such a company. Valuation is attractive, as the PE is mere decimals away from a 5-year low, but not spectacular, and it faces doubts in coming years as consumers become more conservative and it faces competition from others in the field. However, Garmin is in a good position to weather storms for some time to come.

And Garmin is, it seems, a wonderful company. High EPS growth (35% per annum recently), wonderful ROE (43.8%), and immense net margin (28%) all sit on top of a highly-liquid, essentially unassailable balance sheet. Add to this that the company buys shares steadily, pays a 1.1% dividend, and has 35% insider ownership, and short-term troubles seem to pale.

This is not to say that Garmin has no flaws; 1.2% of insider shares have been sold in recent months, though institutions show no change. Their product is becoming almost completely ubiquitous, but their product line seems uncomfortably narrow. That, along with uneasiness in the economy at large recently seems to have pushed the price down massively since its peak. This very well may continue, but regardless, GRMN looks like an excellent addition to a portfolio for several years.

Report this Post Replies: 5 | Reply

Avatar smashignitionst (< 20) Submitted: 4/16/08 12:34 PM

Recs: 1 | Rec This

I don't know if I would say their product line is getting narrow. GRMN spends almost twice as much on R&D as TomTom, and I thought I read somewhere that most of their profits come from products that are only about a year old.

Oh, and S&P reports that if GRMN is able to capture only .1% (a tenth of a percent) of the cell phone market with its upcoming Nuviphone, that would add $400 million a year to sales, alone. I'd have to imagine it would start off at a fairly high margin too, since the PND/phone is a fairly new technology, and we all know Americans love their new technology gadgets!

(keep in mind, a lot of the people out there who would buy this sort of a thing aren't in a recession, themselves. if you haven't lost your 6-figure job, why would you scale back? people love this stuff - the reason why GRMN keeps issuing earnings "surprises" is that people keep forgetting how much Americans eat this stuff up!)

Oh, and I love the quote in your post, btw.

Report this Post Reply

Avatar bluejonnyd (26.27) Submitted: 5/05/08 11:22 AM

Recs: 0 | Rec This

Thanks for the reply; some great information that I wasn't aware of.

Pricing wars seem to have beat them up, though. Good time to get in, if you ask me.

Report this Post Reply

Avatar captainscurvy (61.32) Submitted: 5/15/08 1:40 PM

Recs: 1 | Rec This

Very nice write up - I completely agree... a great company at a great value in a rapidly expanding market.

Report this Post Reply

Avatar TheParadox (80.11) Submitted: 6/10/08 11:31 AM

Recs: 1 | Rec This

while im bullish of GRMN, i would note that GPS is a commodity like business, and these are the firms warren avoids. Also, this is a tech company and warren might avoid it because of that. however, GRMN is trading at a PE of the low teens, where a year or so ago it was in the mid 20's... so it is at a considerable discount...

It had an upward trend, so lets hope it continues.

Report this Post Reply

Avatar TheParadox (80.11) Submitted: 6/10/08 11:37 AM

Recs: 1 | Rec This

...and your write up is good. I do like garmin as they seem to be the well known makers of GPS devices and have a "moat" and barrier to entry.

Report this Post Reply

Garmin Ltd. (GRMN)

25

Featured Broker Partners