Time to buy Garmin | The Dividend Pirate

Garmin

January 9th, 2008 Dividend Pirate Posted in Stocks |

The headline news for today was “Recession may already be here”. Read the complete article that appeared on CNN at http://money.cnn.com/2008/01/09/news/economy/recession/index.htm?postversion=2008010918Well it surely was a bad day for my stocks. My favorite stock Garmin was down 5.25% to 75.9. In intra-day trading Garmin hit a low of 68.3. Garmin was badly affected by a downgrade by an analyst. Most of these analyst are dimwits. After a stock moves up they will upgrade it and vice versa.

Fundamentally Garmin remains a very strong stock. It had one of the best holiday seasons. Look at Amazon’s top sellers in GPS units, http://www.amazon.com/gp/bestsellers/electronics/172526/ref=pd_ts_e_nav. Garmin units are way ahead of its competition. It has zero debt compared to TomTom. It also tricked TomTom and Nokia into overpaying to buy the mapping companies Tele-Atlas and Navteq respectively. You can read more about that story at http://www.fool.com/investing/general/2007/12/04/garmin-chuckles-as-tomtom-pays-the-piper.aspx

Personal navigation devices are just one of the segments in which Garmin is the leader. It is also the world leader in other segments like outdoor/fitness, marine and aviation navigation.

All the fundamental ratios that I look for in a company are very good. Below I mention some,

Statistic	Value	My comments
P/E	22.91	low compared to its growth
Dividend	.75	It gives a dividend which is always good.
Institutional ownership	30%	Its always good that this percentage is low. That means that less mutual funds and other big companies are involved. As the company starts becoming bigger this ratio will increase. Of course as they buy more the price of the stock will skyrocket.
Net Profit Margin	28.3	This is a very good number for now. However this number will come down as they compete more with other personal navigation devices.
Total Debt/Equity (MRQ)	0.00	This is excellent. They have no debt.
Return on Investments	42.4%	This is mind blowing. This means that for every 100 bucks that you give the company, they give you a return of 43 bucks in layman terms.
Sales	36.9%	They had a 36.9% sales growth. Imagine your business growing at that rate.

Garmin is also getting big in Europe as well it has started exploring markets in Asia. I think they will make a killing if they are successful there.

So overall I feel that with the current price of 75 bucks, Garmin is definitely undervalued and if I had money I would buy more of it. However there are other factors that are to be considered such as the current market condition with all the recession talk going on. It would be good to also look in depth at the technical factors before buying this or for that matter any stock. I am planning to read a book soon to learn more about technical analysis. I will keep you guys updated on how Garmin fares in technical analysis.

Disclaimer: Before making any investments, do your own research and then buy it.