April 13, 2018

Valens Research Weekly Equity Idea Highlight for April 11, 2018 – Garmin Ltd.

This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.

Market expectations for a negative inflection in returns and growth appears too pessimistic, considering management’s successful pivot and growing confidence

GRMN saw steady secular decline in their returns from 2006-2014, as the company saw their competitive advantages defeated in their core markets defeated by the likes of Google Maps. The market appears to expect that tend to continue going forward, expecting UAFRS Adjusted ROA to decline by over 1/3 over the next five years. However, the market does not appear to be recognizing the success the company has had since 2014 of reversing that trend, seeing ROA’ rise from 15% to 19% levels, with continued investment in the business. Management has achieved this by successfully pivoting their business to end markets that are not as susceptible to disruption by their current competitors.

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