GRMN - Embedded Expectations Analysis - 2018 05 09
Garmin Ltd. (GRMN:USA) currently trades below corporate averages relative toUAFRS-based (Uniform) Earnings, with a 15.7x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, which may be unwarranted given management's confidence in their margins, new products, and revenues. As such, outperformance is likely justified
Specifically, management is confident in the continued strength of operating margins in their Aviation segment, and in the release of the GCV 20. Additionally, they are confident that they will see an upward trend in gross margins in their Fitness segment as lower-margin activity trackers decline, and in their record first quarter revenue of $711mn, driven by double-digit growth in three of their five segments. At current valuations, should the firm be able to maintain Uniform ROA at current levels as management sentiment suggests, equity upside would be warranted
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