November 27, 2017

GRMN – Although management sentiment suggests near-term returns may be muted, overly bearish market expectations suggest longer-term upside remains warranted


  • Garmin Ltd (GRMN:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 15.7x Uniform P/E. However, even at these levels, the market is pricing in fairly bearish expectations for the firm. Although negative management sentiment suggests near-term upside may be limited, these overly-bearish expectations are likely to support longer-term outperformance should GRMN just maintain profitability at current levels
  • Specifically, although management appears concerned about the sustainability of combined year-to-date revenue growth in outdoor and fitness, and may lack confidence in their ability to capture expanded addressable market opportunities, market expectations are for Uniform ROA to fall to historical lows. At these valuations, should the firm just maintain Uniform ROA at current levels, equity upside would be warranted

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