Garmin Limited Analysis – September 2015 Update $GRMN

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Garmin Limited (GRMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Garmin Ltd. (Garmin) is a provider of navigation, communications and information devices, which are enabled by Global Positioning System (GPS) technology. The Company operates through five business segments: marine, outdoor, fitness, automotive/mobile, and aviation markets. It designs, develops, manufactures, markets and distributes a family of hand-held, wearable, portable and fixed-mount GPS-enabled products and other navigation, communications, sensor-based and information products. It offers a range of automotive navigation products, as well as a range of products and applications designed for the mobile GPS market. It offers a range of products designed for use in outdoor activities. It offers a range of products designed for use in fitness and activity tracking. Garmin offers a range of products designed for use in the recreational marine industry. Garmin’s aviation product line includes GPS-enabled navigation, and electronic flight instrumentation systems (EFIS), among others.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of GRMN – September 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,966,968,683 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.37 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -25.10% Fail
6. Moderate PEmg Ratio PEmg < 20 15.09 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.19 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.37 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

GRMN value Chart September 2015

EPSmg $2.43
MG Growth Estimate -3.24%
MG Value $5.58
Opinion Overvalued
MG Value based on 3% Growth $35.25
MG Value based on 0% Growth $20.67
Market Implied Growth Rate 3.30%
Current Price $36.70
% of Intrinsic Value 658.16%

Garmin Limited qualifies for both the Defensive Investor and the Enterprising Investor.  The Defensive Investor’s only initial concern is the insufficient earnings growth over the last ten years, while the Enterprising Investor is only concerned with the lack of earnings growth over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $3.10 in 2011 to an estimated $2.43 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 3.30% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Garmin Limited (GRMN)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

GRMN Charts September 2015

Net Current Asset Value (NCAV) $5.58
Graham Number $29.36
PEmg 15.09
Current Ratio 2.37
PB Ratio 2.19
Dividend Yield 5.31%
Number of Consecutive Years of Dividend Growth 6



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Most Recent Balance Sheet Figures

Total Current Assets $2,283,296,000
Total Current Liabilities $961,681,000
Long-Term Debt $0
Total Assets $4,423,409,000
Intangible Assets $222,968,000
Total Liabilities $1,214,904,000
Shares Outstanding (Diluted Average) 191,600,000

Earnings Per Share History

Next Fiscal Year Estimate $2.28
Dec14 $1.88
Dec13 $3.12
Dec12 $2.76
Dec11 $2.67
Dec10 $2.95
Dec09 $3.50
Dec08 $3.48
Dec07 $3.89
Dec06 $2.35
Dec05 $1.43
Dec04 $0.95
Dec03 $0.82
Dec02 $0.66
Dec01 $0.53
Dec00 $0.53
Dec99 $0.32

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.43
Dec14 $2.56
Dec13 $2.94
Dec12 $2.92
Dec11 $3.10
Dec10 $3.29
Dec09 $3.28
Dec08 $2.92
Dec07 $2.39
Dec06 $1.51
Dec05 $1.01
Dec04 $0.77
Dec03 $0.65
Dec02 $0.51
Dec01 $0.38
Dec00 $0.26
Dec99 $0.11

Recommended Reading:

Other ModernGraham posts about the company

Garmin Limited Analysis – June 2015 Update $GRMN
18 Companies in the Spotlight This Week – 3/15/15
Garmin Limited Quarterly Valuation – March 2015 $GRMN
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23 Companies to Research This Week – 9/13/14

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






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