But It's Still A Stock You'd Want To Own
Investors woke up in a
bad mood last week, quickly dumping shares of Garmin for not living
up to lofty expectations. Shares in the maker of global positioning
(GPS) equipment were smacked down over 10% to $46.82.
While Garmin's fourth-quarter performance outpaced expectations,
its forward guidance didn't sit well with analysts.
Revenue for the quarter came in at $170.1 million, boosting
full-year revenue to $573 million -- 23% over 2002 sales. Both
measures were above the company's earlier guidance of $155 million
to $160 million for the quarter and $558 million to $563 million
for the year. A consistent moneymaker, Garmin's net income for the
year increased to $178.6 million, a full 25% higher than last
In case you missed Garmin's products on the store shelves over
the holidays, it is the premier supplier of navigation electronics
that uses GPS satellites for accurate positioning. In addition to
products used by outdoor enthusiasts for activities such as hiking
and boating, the company supplies the aviation industry with flight
navigation and communication equipment, on both an original
equipment manufacturer (OEM) and aftermarket basis.
Started in the late 1980's, Garmin mostly developed products for
the military and aviation industry. As consumer use of GPS
technology has grown, Garmin has leveraged its expertise to take a
commanding lead in the market. A whopping 80% of Garmin's
fourth-quarter revenue came from the consumer products segment.
This segment also grew at a nice clip of 29% in 2003 compared to
last year -- and many industry watchers think the proliferation of
GPS technology into consumer electronics is still in its early
While the GPS market has largely escaped the hype of other
high-tech segments, Garmin's fiscal performance has not gone
unnoticed -- the stock is priced with expectations for
above-average growth. After yesterday's drop, shares in the company
currently sit at 28.5 current earnings, and 25 times the mean
forward estimates given by the company.
But to this Fool, Garmin is the kind of company you feel good
about owning -- great margins, consistent cash flow, and a dominant
position in its market. And I'm in good company -- fellow Fools
Jeff Fischer and Rex Moore have been eyeing Garmin as well. With so
many unprofitable companies with overpriced shares dominating the
technology space today, a steady performer with a bright future
like Garmin is worth a look.