Garmin Ltd Valuation – March 2017 $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 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  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 Ltd (GRMN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Garmin Ltd. (Garmin) and subsidiaries offer global positioning system (GPS) navigation and wireless devices and applications. The Company operates through five segments. It offers a range of auto navigation products, as well as a range of products and applications designed for the mobile GPS market. It offers products to consumers around the world, including Outdoor Handhelds, Wearable Devices, Golf Devices, and Dog Tracking and Training/Pet Obedience Devices. It offers a range of products designed for use in fitness and activity tracking. Garmin offers a range of products designed for use in fitness and activity tracking. Its aviation business segment is a provider of solutions to aircraft manufacturers, existing aircraft owners and operators, as well as military and government customers and serves a range of aircraft, including transport aircraft, business aviation, general aviation, experimental/light sport, helicopters, optionally piloted vehicles and unmanned aerial vehicles.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of GRMN – March 2017

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 $9,788,562,246 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.89 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 -23.26% Fail
6. Moderate PEmg Ratio PEmg < 20 20.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.86 Fail
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 2.89 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

EPSmg $2.50
MG Growth Estimate -2.23%
MG Value $10.10
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $36.25
MG Value based on 0% Growth $21.25
Market Implied Growth Rate 6.08%
Current Price $51.67
% of Intrinsic Value 511.69%

Garmin Ltd. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of earnings growth over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.94 in 2013 to an estimated $2.5 for 2017. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.08% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Garmin Ltd. revealed the company was trading above its Graham Number of $32.13. The company pays a dividend of $2.04 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.67, which was below the industry average of 28.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $6.1.

Garmin Ltd. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $6.10
Graham Number $32.13
PEmg 20.67
Current Ratio 2.89
PB Ratio 2.86
Current Dividend $2.04
Dividend Yield 3.95%
Number of Consecutive Years of Dividend Growth 8


Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $2,263,016,000
Total Current Liabilities $782,735,000
Long-Term Debt $0
Total Assets $4,525,133,000
Intangible Assets $305,002,000
Total Liabilities $1,107,130,000
Shares Outstanding (Diluted Average) 189,343,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.53
Dec2016 $2.70
Dec2015 $2.39
Dec2014 $1.88
Dec2013 $3.12
Dec2012 $2.76
Dec2011 $2.67
Dec2010 $2.95
Dec2009 $3.50
Dec2008 $3.48
Dec2007 $3.89
Dec2006 $2.35
Dec2005 $1.43
Dec2004 $0.95
Dec2003 $0.82
Dec2002 $0.66
Dec2001 $0.53
Dec2000 $0.53
Dec1999 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.50
Dec2016 $2.51
Dec2015 $2.47
Dec2014 $2.56
Dec2013 $2.94
Dec2012 $2.92
Dec2011 $3.10
Dec2010 $3.29
Dec2009 $3.28
Dec2008 $2.92
Dec2007 $2.39
Dec2006 $1.51
Dec2005 $1.01
Dec2004 $0.77
Dec2003 $0.65
Dec2002 $0.51
Dec2001 $0.38

Recommended Reading:

Other ModernGraham posts about the company

Garmin Limited Valuation – August 2016 $GRMN
Garmin Ltd Stock Valuation – February 2016 $GRMN
Garmin Limited Analysis – September 2015 Update $GRMN
Garmin Limited Analysis – June 2015 Update $GRMN
18 Companies in the Spotlight This Week – 3/15/15

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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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