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Why Garmin (GRMN) Hit a 5-Year High Today

NEW YORK (TheStreet) -- Garmin (GRMN - Get Report) surged to a five-year high of $52.72 on Wednesday after the navigation device maker reported better-than-expected profits in its fourth-quarter report.

Net income rose to $163.6 million, or 83 cents a share, from $129.3 million, or 66 cents a share, in the same period one year earlier. Earnings per share, excluding items, were 76 cents, which surpassed analysts' estimates of 62 cents, according to Thomson Reuters I/B/E/S.

Garmin also said it expects full-year revenue in 2014 in the range of $2.6 billion to $2.7 billion and earnings per share of $2.50 to $2.60. This beat analysts' expectations of $2.56 a share on $2.58 billion in revenue.

Sales from Garmin's personal navigation devices, which once dominated the market, fell 12% to $382.5 million for the quarter, but sales from all other areas rose 14% to account for almost half of the company's total sales in the period. Aviation unit sales, which include audio panels and collision avoidance systems to various aircraft makers, spiked 25% to $87.4 million. Fitness unit sales, which include the "Forerunner" brand watches that have GPS, can count calories and monitor heart rate, climbed 14% to $118.6 million.

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TheStreet Ratings team rates GARMIN LTD as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GARMIN LTD (GRMN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • GRMN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, GRMN has a quick ratio of 1.72, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for GARMIN LTD is rather high; currently it is at 56.61%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 29.15% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $216.61 million or 31.35% when compared to the same quarter last year. In addition, GARMIN LTD has also modestly surpassed the industry average cash flow growth rate of 25.91%.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Household Durables industry average. The net income increased by 33.7% when compared to the same quarter one year prior, rising from $140.35 million to $187.67 million.
  • You can view the full analysis from the report here: GRMN Ratings Report

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