Garmin Stock: Undervalued and Ready to Run

From the looks of it, Garmin Ltd. (NASDAQ:GRMN) had a tough year as the personal navigator and automotive navigator industries continued to fade. Traders keen on shorting GMRN only had to look at declining revenues in those industries for encouragement.

Source: Garmin
Peek under the surface, however, and Garmin is expanding into a diverse set of industries that may soon prove very profitable for the company.

GRMN Bets on Activity Trackers and Advertisements

Source: Garmin

Thanks to diversification, GRMN is offsetting declines in its navigation equipment with gains in GRMN wearables. The company has faith in wearables, claiming a 15% share in the activity tracker market and targeting 25% growth in wearables this year alone.

I wrote previously of GoPro Inc (NASDAQ:GPRO) running into trouble, but where GPRO shows weakness GRMN sees opportunity. Garmin CEO Cliff Pemble wants action cameras to comprise a nice chunk of Garmin’s growth. The company is eyeing advertisements with Red Bull and sponsorship of pro snowboarders in the 2015 Winter X-Games as major showcases for GRMN action cameras and wearables.

Garmin has also made smaller, but substantial gains in aviation and marine products. It makes professional grade navigation and instruments, such as The GDL 84H and GDL 88H, which provide pilots with real-time traffic/weather data and prevent mid-air collisions.

GRMN Continues to Grow

Despite its challenges, GRMN reported sales growth of 6% year-over-year for the fourth quarter. GAAP earnings in the recent quarter grew more than 30% compared to the same quarter the prior year.

GRMN stock is trading around $49 a share and has a high price target of 68. It’s P/E is 26 based on the trailing 12 months. Of its 191 million shares, 72 million are held by insiders, or roughly 38%. That’s a good sign.

Also friendly to shareholders: Garmin is planning to increase the dividend to $2.04 annually, an increase of 3 cents a quarter. It also plans to buy back $300 million shares through Dec. 31, 2016.

Don’t be fooled by the 6% drop in GRMN stock in the past year. That’s partly the result of short sellers and it’s not indicative of the potential growth in Garmin.

GRMN continues to produce great products that are selling well. That, plus the proposed dividend increase to an attractive 4.1% yield, are reasons enough to add this one to your portfolio sooner rather than later.

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