February 27, 2018

GRMN – Given management’s confidence about their fenix series and gross margin outlook, bearish market expectations are unwarranted, and upside is likely


    • Garmin Ltd (GRMN:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 17.3x Uniform P/E. However, even at these levels, the market is pricing in fairly bearish expectations for the firm, which may be unwarranted given management’s confidence about their fenix series and gross margin outlook. As such, outperformance is likely justified
    • Specifically, management is confident in the fenix series driving revenue growth in their outdoor segment in 2018, and in their projection for gross margin to improve to approximately 58.5% for the year. At current valuations, should the firm just maintain Uniform ROA at current levels as management sentiment would suggest, equity upside would be warranted
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