GRMN will go UP
$63.00 on 12/08/08
$30.86 (-39.89% from time of market call)
Garmin has been trading between $39.75 and $125.68 within the past 52
weeks and has showed tremendous volatility. My analysis is based on
future projections of revenue growth at an estimated 35% of the year
ago revenue which is a relatively modest estimation considering
historical performance. With this 35% estimated growth in revenue from
(the year ago sales considering how this business has higher sales in
the 3 and 4th quarter this is reasonable) The revenue comes to roughly
3,588 million for all of 2008 when you simply multiply the prior years
quarter sales by 1.35 and add them all up. This will give an accurate
estimate on the conservative side because it assumes that growth has
slowed down from 2006-2007-2008 year over year to only a 12% overall
growth in revenue. The corresponding net income would be $1,004
million and eps estimate of 4.56 which represents a 17% growth rate in
eps for 2008. To correlate the eps estimate to share price movement i
simply look at the movement in share price in previous years and their
correlation to the financial statement information. For example the
share price was $52/share in january 2007 and ended the year at $99/
share roughly in december 2008. the eps from 2007-2008 increased 66%
and the share price increase 90%. This would indicate a slight
overvaluation within this time period. As for whats going to happen
with this stock. It is currently at $51.34/share. Since the market
tends to overvalue this stock by a 36% increase (99%-66% / 66%) im
going to safely assume this will happen again and the eps growth of
17% estimated will mirror a share price increase of 17% x 1.36 = 23%
increase in share price for Garmin in the year. Therefore my analysis
is that garmin's share price will increase by 23% by years end. The
question now becomes when do i get in??? well the share price is
$51.34/share and i personally think now is a good a time as any. the
share price has been hammered and i have good enough reason to believe
this stock is undervalued... Any comments or opinions are valued
Nice try at a rational analysis. The problem with a company like
Garmin (a stock which I own) is that, as Burton Makiel (Random Walk
Down Wall Street...a must read) says "...G-d himself does not
know what PE to accord a stock." It is generally reasonable to
believe a PE should be in line with the projected growth rate of a
stock. The problem here is that no one seems know what growth stage
Garmin is in. Is it in early growth, mid-stages, or are we already
nearing a cyclical phase.
In other words...what will the future stream of earnings look
like...and how long will the growth last. The certainty of future
growth is what investors will pay up for. The certainty here is
murky, at best. Garmin's future will be dependent on its
ability to innovate and distinguish itself from its competitors.
The stock now is a weak hold (which I'm doing), because the
consumer stocks are so weak, a rally should happen sometime this
year. If it does...SELL.
