Profit ratio

Should You Investigate Garmin Ltd. (NYSE: GRMN) to $104?

Garmin Ltd. (NYSE:GRMN) has seen significant stock price movements over the past several months on the NYSE, reaching highs of US$121 and falling to lows of US$97.95. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Garmin’s current price of US$104 reflect the true value of the large cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at Garmin’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Garmin

What is the opportunity at Garmin?

Garmin is currently expensive based on my multiple price model, where I look at the company’s price-to-earnings ratio against the industry average. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find Garmin’s ratio of 18.62x to be higher than its average of 8.46x, suggesting the stock is trading at a higher price relative to the consumer durables industry. But is there another opportunity to buy cheap in the future? Since Garmin’s stock price is quite volatile, this could mean it may go down (or up even more) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator of how the stock is doing relative to the rest of the market.

What does the future of Garmin look like?

NYSE: GRMN Earnings and Revenue Growth June 2, 2022

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With profits expected to increase by 28% over the next two years, the future looks bright for Garmin. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.

What does this mean to you :

Are you a shareholder? It looks like the market has well and truly priced in the positive outlook from GRMN, with stocks trading above industry price multiples. At this current price, shareholders may ask a different question: should I sell? If you think GRMN should be trading below its current price, selling at a high price and buying it back when its price falls towards the industry PE ratio can be profitable. But before making this decision, see if its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on GRMN for a while, now might not be the best time to enter the stock. The price has outpaced its industry peers, which means there are likely to be no more benefits associated with poor pricing. However, the positive outlook is encouraging for GRMN, which means it is worth digging into other factors in order to take advantage of the next price drop.

If you want to learn more about Garmin as a company, it’s important to be aware of the risks it faces. At Simply Wall St, we found 1 warning sign for Garmin and we think they deserve your attention.

If you are no longer interested in Garmin, you can use our free platform to view our list of over 50 other stocks with high growth potential.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.