Bear of the Day: Garmin (GRMN)

There was a time when Garmin ( GRMN - Analyst Report ) was the key player in the navigation equipment space. The firm’s automotive and aviation products led the way for many consumers, and allowed the company to rise to prominence over the past few years.

However, with the advent of numerous competitors and near-universal availability of GPS devices in phones, Garmin is now facing an extremely rough period. In fact, its most important segment, the automotive/mobile space, accounts for over half the company’s net sales, but has not seen any growth over the past three annual reports.

Obviously, when half of your business is flat it is tough to turn make a turn higher, and that is largely why Garmin is now sporting a Zacks Rank of 5 or ‘Strong Sell’.

This low Rank, which puts GRMN into terrible company, is due to how unfavorably analysts are viewing these aforementioned trends. Estimates have broadly come down in the past sixty days, with only one estimate going higher in the past month, compared to five lower in the same time period.

The outlook is even worse for the long term as current year estimates are in universal agreement lower. Analysts are actually expecting negative double digit growth when compared to last year, so the picture is pretty terrible all around for the GRMN.

This is particularly true when investors look at the price and consensus chart for Garmin, which I have reposted below:

As you can see, GRMN’s consensus hasn’t exactly been moving higher, suggesting that growth isn’t going to be in this company’s near future. This is probably why over the past year, GRMN has lost almost 30% of its value, including 17% YTD.

While this might be forgivable in an extreme bear market, this hasn’t been the case over the past few months. Instead, GRMN has underperformed the S&P 500 by an enormous margin (the index is up about 6.7% so far in 2013), meaning that this has been a terrible place to put money over the longer term.

Bottom Line

While GRMN might have some interesting products in a few segments, it isn’t enough to make up for the flat-line in growth that the company is seeing in its most important market. Without a turnaround here, this company could be headed lower, especially if the recent analyst revision picture is any guide.

So, don’t get fooled by this company’s solid dividend, this stock is probably a value trap for most investors at this time. Yes some smaller segments are still doing well at this company, but the broad trend is against this space. There are plenty of better stocks out there, and most investors would probably be better served looking there until Garmin can find its way back to growth once more.

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