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Bull of the Day: Garmin (GRMN)

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It has, at times, been difficult to put one’s finger on the exact investing strategy which has had the most success this year, but in hindsight, it seems a combination of growth, income, and momentum has been successful. One stock that sports all three of these things—and makes quality consumer electronics—is Garmin Ltd. (GRMN - Free Report) .

Garmin is a pioneer of personal GPS navigation products, and it now also provides high-quality, fitness-forward wearable technology devices. The company serves five primary businesses: automotive, aviation, fitness, marine, and outdoor recreation. This means Garmin has exposure to exciting growth opportunities and legacy tech markets, and it stands as a leader in both.

This Zacks Rank #1 (Strong Buy) stock pays a dividend, has generated strong momentum over the past several month, and is poised for near-term and long-term earnings growth.

Earnings and Outlook

In its most recent quarter, Garmin reported earnings of 68 cents per share, beating the Zacks Consensus Estimate by a healthy 12 cents and improving 31% year over year. The firm also posted better-than-expected revenue of $710.9 million, which was up nearly 11% from the year-ago quarter.

More importantly, Garmin once again displayed a healthy balance sheet. The company generated cash flow from operating activities in excess of $214 million. It has no long-term debt, and its cash and equivalents now total $1.07 billion.

Garmin’s positive results and upbeat outlook have since inspired a number of positive earnings estimate revisions. Here’s a look at the latest:

The Zacks Rank is fundamentally based on these estimates and revisions, so this positive trend explains Garmin’s #1 (Strong Buy) designation. However, there are other reasons to be optimistic about this stock right now.

Momentum

It does not generate as much buzz as a lot of other consumer tech companies, but Garmin has been marching consistently higher recently. In fact, shares have added about 12% over the past four months, including a solid 5% climb in the past three weeks. This follows a roughly 100% climb since the beginning of 2016, and now GRMN is sitting at its five-year high.

Here’s a look at this recent momentum, overlaid with Garmin’s expected earnings per share results for the current and next fiscal years:

What this chart also shows is GRMN’s earnings growth. Remember, this is a legacy tech company that has been making consumer devices since the 90s.

We obviously won’t see explosive growth here, but as we can see from the gap between the two earnings consensus lines, Garmin is still expected to improve its bottom line. Looking ahead, Garmin is sporting a long-term projected annualized EPS growth rate of 7.4%.

Valuation

In addition to its growth and momentum traits, Garmin is also looking like a value opportunity. The stock has a P/E ratio of 19.8, which is a discount to its industry’s average of 21.1. Meanwhile, its PEG of 2.7 is a slight premium to the industry but certainly not outside of a reasonable range.

It is also worth noting that Garmin generates about $3.42 in cash per share, which is one of the healthiest ratios in its industry. Plus, Garmin offers a dividend yield of 3.3% right now.

Bottom Line

Garmin has a little bit to offer every investor. Its estimate revision trends have been positive, its bottom line is still growing, shares are marching higher, and the valuation is in check. This Zacks Rank #1 (Strong Buy) is definitely a solid tech option today.

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