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Tuesday, October 09, 2007

Through The Fly's Eyes: Garmin

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.



Garmin: Following A Positive Trading Channel

When it comes to global positioning system hardware, there is a firm in the Cayman Islands that can tell you just where you stand.

Garmin Ltd. (GRMN) manufactures products enabled by global positioning system technology. The firm's Consumer segment offers instruments used in automotive navigation, general recreation and business applications. The Aviation segment provides a panel-mounted product line that enables flight navigation, very high frequency communications and instrument landings. Boat manufacturer Ranger and airplane maker New Piper use Garmin equipment in their vehicles. The company's consumer products are sold through such retailers as Best Buy (BBY) and Wal-Mart (WMT).

The stock passed through late July, August and September cycling upward through a positive trading channel. It was sustained in that move by such issues as a better than expected Q2 report, solid upside guidance for FY07 and generally favorable analyst remarks (price targets to $130). Prices fell briefly below the base of the channel last week, on word Nokia (NOK) had made a bid for digital map database firm Navteq (NVT). Analysts had expected that Garmin would make such a move, as it relies heavily on NVT information.

The issue has popped back into the lower portion of the channel, however, as some say Garmin may yet make a bid and most believe it would continue to do business with Navteq under Nokia's ownership, in any event. Analysts are now out reiterating, or upgrading previous positions on the stock and GRMN call options are active. These developments suggest that GRMN shares may resume their positive channel trend.

Brokers recommend the issue with three "strong buys", two "buys", fourteen "holds" and one "sell". Analysts expect an 18% growth rate, through the next year. The GRMN Sales Growth rate (71.58%), EPS Growth rate (78.57%), Operating Margin (31.05%), Net Profit Margin (29.18%), Return on Assets (32.03%), Return on Investment (39.80%), Return on Equity (41.07%) and Net Income per Employee ($144k) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 33% of the outstanding shares. The stock is one of those used to calculate the Nasdaq 100 Index. Over the past 52 weeks, it has traded between $44.53 and $122.78. A stop-loss of $94.90 looks good here. Note that the firm is expected to issue Q3 results on October 31st, before the open.

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