Smartwatch

Should Investors Buy Shares In Garmin Right Now?

Often written off as a relic of the past, are we too quick to write off Garmin and the potential value it has to investors?

This article can be found in the MyWallSt App, alongside an audio companion. Sign up today for a free account and get access to dozens of expertly written articles and analyst opinion pieces every month.

First Looks are some of my favorite Insights to write. They’re an opportunity to find niche players I’ve never heard of or get under the hood of a big name making its stock market debut. Oftentimes, this means I have little in the way of expectations. I don’t want my initial opinion to blind me to the reality of the data.

However, I’m not perfect.

Today’s First Look will explore Garmin, a company that I and the other analysts had written off as a relic of road trips past. To me, Garmin makes the GPS that came with your rental car in 2007 or the golf watch your boss wears (Hi JT!). Its branding makes me yawn and elicits the same amount of excitement as a pair of hiking boots or a bag of granola. It’s bland, and this blandness poisoned my thoughts.

Turns out, Garmin is almost the perfect investment. Its highlights include:

  • A highly diversified stream of revenue that has grown reliably over the last six years. In FY 2021, it was up 19% YoY reaching $4.98 billion.
  • An astounding 24.5% operating margin. A mind-blowing figure when you remember it manufactures hardware and this is slightly below where it was in 2020 due to supply chain issues and increased shipping expenses. 
  • Vertical integration — need I say more? 
  • Absolutely zero debt and $3.2 billion of cash on hand. This explains why they’re so fond of stock buybacks.
  • And to top it all off, a 2.58% annual dividend, which is expected to rise by 9% in 2022.

Simply stunning.

How does Garmin pull this off? Let’s break it down…

Read More