Garmin Ltd. (GRMN)

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.

Garmin is run by a principle of vigorous but intelligent innovation in a tech field (GPS location) that should get progressively more important in both the aviation and in the consumer markets. Further products in echo-location and personal fitness are natural additions to their product lines. I can't justify the expense of one of their cyclometer-speedometer-pacemeter-heartmeter multifunction bikie thingies for my own use, but I can sure afford the stock. The 10-K annual report is exceptionally well-written and clearly presented, and suggests first-rate business practice, close in-house control of all manufacturing, and a good benefits arrangement for employees.

The stock may go up and down and currently is trading just below its (very recent) 52-week high, but the company should continue to grow in value.

This company has hit the sweet spot in its growth cycle, with the rapid adoption of GPS technology coinciding with its dominance of the US market. The news has been all good in recent quarter. This is another long term outperformer.

I was in love with this stock for a while, too. But looking at this company objectively, it has no moat. Thats why prices are coming down, as GPS is becoming a commodity offered readily by all the major communications companies (Nokia, Apple, etc....). Sure the stock is cheap, but which would you rather by, an sleek new Smartphone with built-in GPS or a bulky, overpriced one-trick pony like a Garmin? Garmin is coming out with a Smartphone, but I doubt it will be competitive with an iPhone or a Blackberry.

Ask any Garmin nuvi (tm) owner: travel will never be the same. Garmin has the best rep in the industry for quality of maps, and they've recently incorporated the best GPS chipset from SiRF Technologies. GPS is going mainstream, and Garmin is the industry leader.

If Garmin was priced like Apple or Google or a new company behind a fab new product, I would understand the continued pounding the stock has been taking. But it's still growing both earnings and revenues (albeit not as fast as it once did) and yet is trading at a historic low multiple. I understand that in these challenging times missing earnings and revenue estimates (slightly) is naturally going to drive a negative stock reaction, especially if you're a technology company. But Garmin now seems incredibly cheap at these levels, and the fact that their stock is getting punished while an absolutely putrid company like GM (granted, completely different universe) is up 8+% simply because their multi-billion dollar quarterly loss was a little "better" than the "experts" anticipated does not make any long-term logic.

I am worried for Garmin that its core technology -- GPS devices -- is being disrupted through assimilation of GPS features in many other non-Garmin devices (Apple iPhone just one example). While in many ways Garmin still does it better, the nature of disruptive innovation is that others satisfy the desires of the marketplace at much cheaper price points, and even if the product is not as good, it's "good enough."

Garmin's answer, the Nuviphone, is defensive, and I am pessimistic that it will succeed. Meantime, I think the market for Garmin's core business, pure GPS devices in many SKUs and formats, is an incredible cash cow but one that is extremely mature at this point, with little meaningful growth left.

There are many things to love about Garmin, not the least of which is its smart, seasoned management. And hey, for those who feel they know Garmin better than I do (and there are many who do), and think it's a good stock to beat the market and that I'm a fool (small "f") for picking Underperform, I encourage them to stick to their guns! I'm wrong all the time.

Garmin is a leader in the manufacturing of a variety of products based on global positioning system (GPS) technology, including handheld GPS units and automotive navigation devices. I am an owner of Garmin products and also its stock. I have owned shares of Garmin for over 2.5 years, weathering some fairly dramatic falls and even larger rises in its share price. With over $400M in cash, zero debt, quarterly dividend, and over 28% of its stock held by insiders, I see this as a strong long-term investment opportunity and plan to hold on to it for at least another 5 years.

Too much risk of low-end disruption. The basic GPS navigation solutions that currently retail for $400+ will be $150 in two years. They are responding by releasing higher-end products that don't substantially add value - a classic strategic error. Their avionics business is solid, but a small fraction of their expected future cash flows.

As GPS becomes cheaper and cheaper (i.e. more easily integrated into more and more products), GRMN will be in the best position to profit. Imagine GPS standard in every vehicle. GPS available as part of you backpack, mountain bike, etc. Lots of growth potential until GPS is considered a commodity (think Computers, VCRs).

Yet another company slammed with the cudgel of "guilt by association". Strong, stable financials, growing profits, and an improving market will see this through. Did I mention this stock is on sale?

Garmin is a company I would really love to hate right now, but I just can't bring myself to do it. After working through the numbers in June, I thought $45 per share was a good price and then watched it drop down to $35 in a day. (Small potatoes compared to anyone who got in over $100) But despite all the bad news right now, (witness the recent well written article by Rich Smith), I think that what is really killing Garmin right now is "what-if" future scenarios, and not necessarily actual events. Will the global economy hurt sales over the next year or two? Likely. (But a glance at FCF for 2001-2003 will help assuage those fears a bit) Will Apple and other multi-task phones steal market share? Probably. But my guess, (and what I'm hoping to see), is for Garmin to buckle down and retrench itself in selling to a market of serious GPS users. I'm going to go ahead and guess that you're not going to see anyone out on a backpacking trip in the near future with their iPhone. That's where Garmin's market is and they need to recapitalize on it.

As for an investment, I just don't see much risk and a lot of potential for upside. I'm mostly a valuations guy, (who would welcome any criticism of my analysis), and what I see is a mid-cap company with almost $3.50 a share in cash and no debt, who is using their cash flow to expand into new markets while increasing shareholder value by buying back large amounts of their own stock at historically low levels. ROA, ROI and NPM are still obscenely high, (although contracting - it's true), and insiders, (who happen to do a great job of running the company), still own almost half of the outstanding stock.

For a future valuation I tend to go with the DCF model, and I can't even find anything there not to like. With a Discount Rate of 12%, (for risk), I still find Garmin to be fairly valued if they don't grow FCF at all over the next ten years. And if they could roll out 10% growth of FCF, you'd be buying a company with a Buffet-type margin of safety of 40%.

So the question is, does Garmin have a future? Or are they slowly, (or quickly), going to fade into the abyss of great companies that couldn't adapt to changing market conditions and disruptive technology. (Ironic how the tables have turned. Wasn't that what people were saying about Apple earlier this decade? And now Apple is one of the disruptors Garmin investors are worried about. Maybe Garmin can lure over Steve Jobs...)

My two cents? I don't think Garmin is finished. I think they are more innovative than people believe, and this seems like one of those perfect situations on which to bet on a comeback. A fundamentally sound, well-run company, with cash to maneuver and some serious negative investor sentiment. Of course, I could be wrong.

iNEXPENSIVE AT 54. PEG TTM 1.4, YOY EPS GROWTH OF 107%, GREAT PRODUCTS AND PATENTS.

"Wednesday February 20, 10:23 am ET

BANGALORE (Reuters) - Navigation device maker Garmin Ltd (NasdaqGS:GRMN - News) beat Wall Street estimates with a 70 percent jump in quarterly profit as revenue in its automotive and outdoor/fitness segments climbed, pushing shares up more than 5 percent.

Garmin's fourth-quarter profit rose to $307.3 million, or $1.39 cents a share, from $180.3 million, or 82 cents a share, a year ago. Excluding items, earnings were $1.31 a share. Revenue almost doubled to $1.23 billion.

Analysts on average expected the company to earn $1.11 a share, before items, on revenue of $1.03 billion, according to Reuters Estimates."

And on THIS news the stock DROPS 10% in a day? I have to pick this as an outperform just on principle alone.

Peter Lynch would love GRMN...the outstanding world leader in GPS. The "street" has not yet realized how these navigation devces will favorably impact the lives of the vast majority, believing GPS is just anouther hi tech gadget.....Portable auto units are, just now, starting to sell (around $400) a HUGE potential market. Garmin now has 20% of the faster growing European market & 50% of the U.S.auto market.
It is light years ahead of the pack, dominating the world general aviation avionics market, and the top provider of marine & recreational GPS.........All indications point to an exciting "ground floor" oppertunity. mrbirdly

the selloff after earnings were announced makes no sense to me... margin issues will be prevalent but the issues will be mitigated by rapid growth of the industry. talking about changes in inventory levels as being a major concern considering the "dramatic" rise in these levels is a joke.... point 1 - you sell more units in 1 quarter than all of 2006 means you need to generate more units and thereby hold more inventory than the previous year. point 2 - more competition is going to be difficult for companies with a poor management structure in place, not so with garmin... as evidenced by 8 of 9 quarters beating expectations. I think the run on the stock is necessary but when you add 1) more sales units, 2) good management, 3) forward p/e under 15 and 4)margin decreases which will be offset by volume increases tells me one thing. BUY. and so i did.

I will be monitoring it closely and probably sell once i get the 10% in 20 days as i expect. but maybe not.

Full disclosure: I am a Garmin owner--both the stock and several of their products. This company is clearly the leader in a field which is sure to become more important and common. As an ocean sailor I see this product (GPS) becoming a basic essential. It is also becoming a standard in all sorts of vehicles (cars, trucks,boats, airplanes) and soon in phones, and other mobile consumer products, allowing you (and in some cases other people) to immediately know exactly where you (or your product) is at any time. While it doesn't have the monoply or tough business sense of a Microsoft, it is the likely winner in producing a product which is moving from non existance just a few years ago to world wide essential, a bit like those things which were unknown not that many years ago, and are now an essential product world wide called computers.

A great-looking company in a hot, expanding, market. 5-yr CAG over 30% for revenues, cash flow, and EPS. Great balance sheet (no debt, $4 a share in cash & investments). Best in class products. Shareholder-friendly (negative dilution since IPO in 2001). Innovative, spending 7.5% annually on R&D; over 50% of sales in 1st Qtr from products introduced in previous 12 months. I think I can put this one in the bank.

I was in a small Ohio town the other day and needed directions. i have been reading the posts on Caps for quite some time and laugh when reading that people think that a phone GPS compares to a dedicated Garmin GPS. I started up my Nuvi and stuck my I phone out the window and was interested to see the results. The Garmin kicked the i-phones butt. The Garmin was ready upon turning it on while the phone searched for my position forever. The user interface on the Garmin is easy and quick. The phone is a pain in the butt. The two can't be compared. As a phone and GPS if I cant afford a Garmin the i-phone is fine, but if i want directions and to know where I am while driving and on the phone, the Garmin is much, much better.