Intrinsic value of Garmin Ltd. - GRMN

Previous Close

$83.58

  Intrinsic Value

$46.65

stock screener

  Rating & Target

sell

-44%

Previous close

$83.58

 
Intrinsic value

$46.65

 
Up/down potential

-44%

 
Rating

sell

We calculate the intrinsic value of GRMN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 15.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.90
  4.01
  4.11
  4.20
  4.28
  4.35
  4.42
  4.47
  4.53
  4.57
  4.62
  4.65
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.83
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
Revenue, $m
  3,478
  3,617
  3,766
  3,924
  4,092
  4,270
  4,458
  4,658
  4,868
  5,091
  5,326
  5,574
  5,835
  6,111
  6,401
  6,707
  7,028
  7,367
  7,723
  8,098
  8,492
  8,906
  9,342
  9,800
  10,281
  10,787
  11,319
  11,877
  12,464
  13,081
Variable operating expenses, $m
  2,021
  2,100
  2,183
  2,272
  2,367
  2,467
  2,573
  2,685
  2,803
  2,928
  2,994
  3,133
  3,280
  3,435
  3,598
  3,770
  3,951
  4,141
  4,341
  4,552
  4,774
  5,007
  5,251
  5,509
  5,780
  6,064
  6,363
  6,677
  7,007
  7,354
Fixed operating expenses, $m
  650
  664
  679
  694
  709
  725
  741
  757
  774
  791
  808
  826
  844
  863
  881
  901
  921
  941
  962
  983
  1,004
  1,027
  1,049
  1,072
  1,096
  1,120
  1,145
  1,170
  1,195
  1,222
Total operating expenses, $m
  2,671
  2,764
  2,862
  2,966
  3,076
  3,192
  3,314
  3,442
  3,577
  3,719
  3,802
  3,959
  4,124
  4,298
  4,479
  4,671
  4,872
  5,082
  5,303
  5,535
  5,778
  6,034
  6,300
  6,581
  6,876
  7,184
  7,508
  7,847
  8,202
  8,576
Operating income, $m
  806
  853
  903
  958
  1,016
  1,078
  1,145
  1,216
  1,292
  1,372
  1,524
  1,615
  1,711
  1,813
  1,921
  2,035
  2,156
  2,284
  2,420
  2,563
  2,713
  2,873
  3,041
  3,218
  3,406
  3,603
  3,811
  4,031
  4,262
  4,506
EBITDA, $m
  953
  1,003
  1,057
  1,115
  1,177
  1,244
  1,314
  1,390
  1,471
  1,556
  1,647
  1,744
  1,846
  1,954
  2,069
  2,191
  2,319
  2,455
  2,598
  2,750
  2,910
  3,079
  3,257
  3,445
  3,644
  3,853
  4,073
  4,306
  4,550
  4,808
Interest expense (income), $m
  0
  0
  3
  5
  8
  11
  15
  18
  22
  26
  30
  34
  39
  44
  49
  54
  60
  66
  73
  79
  86
  94
  101
  110
  118
  127
  137
  147
  157
  168
  180
Earnings before tax, $m
  806
  850
  898
  949
  1,005
  1,064
  1,127
  1,194
  1,266
  1,342
  1,490
  1,576
  1,667
  1,764
  1,867
  1,975
  2,090
  2,212
  2,340
  2,476
  2,620
  2,771
  2,931
  3,100
  3,278
  3,466
  3,665
  3,874
  4,094
  4,326
Tax expense, $m
  218
  230
  242
  256
  271
  287
  304
  322
  342
  362
  402
  425
  450
  476
  504
  533
  564
  597
  632
  669
  707
  748
  791
  837
  885
  936
  989
  1,046
  1,105
  1,168
Net income, $m
  589
  621
  656
  693
  733
  776
  822
  872
  924
  980
  1,087
  1,150
  1,217
  1,288
  1,363
  1,442
  1,526
  1,615
  1,709
  1,808
  1,913
  2,023
  2,140
  2,263
  2,393
  2,530
  2,675
  2,828
  2,988
  3,158

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,114
  5,319
  5,538
  5,770
  6,017
  6,279
  6,556
  6,849
  7,159
  7,487
  7,832
  8,197
  8,581
  8,986
  9,413
  9,863
  10,336
  10,833
  11,357
  11,908
  12,488
  13,097
  13,738
  14,411
  15,119
  15,863
  16,645
  17,466
  18,330
  19,237
Adjusted assets (=assets-cash), $m
  5,114
  5,319
  5,538
  5,770
  6,017
  6,279
  6,556
  6,849
  7,159
  7,487
  7,832
  8,197
  8,581
  8,986
  9,413
  9,863
  10,336
  10,833
  11,357
  11,908
  12,488
  13,097
  13,738
  14,411
  15,119
  15,863
  16,645
  17,466
  18,330
  19,237
Revenue / Adjusted assets
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
  0.680
Average production assets, $m
  869
  904
  941
  981
  1,023
  1,067
  1,115
  1,164
  1,217
  1,273
  1,332
  1,393
  1,459
  1,528
  1,600
  1,677
  1,757
  1,842
  1,931
  2,024
  2,123
  2,226
  2,335
  2,450
  2,570
  2,697
  2,830
  2,969
  3,116
  3,270
Working capital, $m
  372
  387
  403
  420
  438
  457
  477
  498
  521
  545
  570
  596
  624
  654
  685
  718
  752
  788
  826
  866
  909
  953
  1,000
  1,049
  1,100
  1,154
  1,211
  1,271
  1,334
  1,400
Total debt, $m
  48
  99
  153
  211
  272
  337
  406
  479
  556
  637
  723
  813
  908
  1,009
  1,115
  1,226
  1,343
  1,467
  1,597
  1,733
  1,877
  2,028
  2,187
  2,354
  2,530
  2,714
  2,908
  3,112
  3,326
  3,551
Total liabilities, $m
  1,268
  1,319
  1,373
  1,431
  1,492
  1,557
  1,626
  1,699
  1,776
  1,857
  1,942
  2,033
  2,128
  2,229
  2,334
  2,446
  2,563
  2,687
  2,817
  2,953
  3,097
  3,248
  3,407
  3,574
  3,750
  3,934
  4,128
  4,332
  4,546
  4,771
Total equity, $m
  3,846
  4,000
  4,164
  4,339
  4,525
  4,722
  4,930
  5,151
  5,384
  5,630
  5,890
  6,164
  6,453
  6,758
  7,079
  7,417
  7,772
  8,147
  8,541
  8,955
  9,391
  9,849
  10,331
  10,837
  11,369
  11,929
  12,517
  13,135
  13,784
  14,466
Total liabilities and equity, $m
  5,114
  5,319
  5,537
  5,770
  6,017
  6,279
  6,556
  6,850
  7,160
  7,487
  7,832
  8,197
  8,581
  8,987
  9,413
  9,863
  10,335
  10,834
  11,358
  11,908
  12,488
  13,097
  13,738
  14,411
  15,119
  15,863
  16,645
  17,467
  18,330
  19,237
Debt-to-equity ratio
  0.010
  0.020
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.250
Adjusted equity ratio
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752
  0.752

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  589
  621
  656
  693
  733
  776
  822
  872
  924
  980
  1,087
  1,150
  1,217
  1,288
  1,363
  1,442
  1,526
  1,615
  1,709
  1,808
  1,913
  2,023
  2,140
  2,263
  2,393
  2,530
  2,675
  2,828
  2,988
  3,158
Depreciation, amort., depletion, $m
  147
  150
  154
  157
  161
  165
  170
  174
  179
  184
  123
  129
  135
  141
  148
  155
  163
  171
  179
  187
  197
  206
  216
  227
  238
  250
  262
  275
  289
  303
Funds from operations, $m
  735
  771
  809
  850
  894
  942
  992
  1,046
  1,103
  1,164
  1,211
  1,279
  1,352
  1,429
  1,511
  1,597
  1,689
  1,785
  1,887
  1,995
  2,109
  2,229
  2,356
  2,490
  2,631
  2,780
  2,937
  3,103
  3,277
  3,461
Change in working capital, $m
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  33
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  66
Cash from operations, $m
  721
  756
  793
  833
  876
  923
  972
  1,024
  1,080
  1,140
  1,186
  1,253
  1,324
  1,400
  1,480
  1,565
  1,654
  1,749
  1,849
  1,955
  2,067
  2,185
  2,310
  2,441
  2,580
  2,726
  2,880
  3,043
  3,214
  3,395
Maintenance CAPEX, $m
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -163
  -171
  -179
  -187
  -197
  -206
  -216
  -227
  -238
  -250
  -262
  -275
  -289
New CAPEX, $m
  -33
  -35
  -37
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -76
  -80
  -85
  -89
  -94
  -99
  -104
  -109
  -114
  -120
  -126
  -133
  -140
  -147
  -154
Cash from investing activities, $m
  -110
  -115
  -121
  -127
  -133
  -140
  -146
  -153
  -161
  -169
  -177
  -185
  -194
  -204
  -214
  -224
  -235
  -248
  -260
  -273
  -286
  -301
  -315
  -330
  -347
  -364
  -383
  -402
  -422
  -443
Free cash flow, $m
  611
  641
  672
  707
  744
  783
  826
  871
  920
  972
  1,009
  1,067
  1,130
  1,196
  1,266
  1,340
  1,419
  1,502
  1,590
  1,683
  1,781
  1,885
  1,995
  2,110
  2,233
  2,362
  2,498
  2,641
  2,793
  2,952
Issuance/(repayment) of debt, $m
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159
  167
  176
  185
  194
  204
  214
  225
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  48
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  90
  95
  100
  106
  111
  117
  123
  130
  137
  144
  151
  159
  167
  176
  185
  194
  204
  214
  225
Total cash flow (excl. dividends), $m
  660
  691
  727
  764
  805
  848
  895
  944
  997
  1,053
  1,095
  1,158
  1,225
  1,296
  1,372
  1,451
  1,536
  1,625
  1,720
  1,819
  1,925
  2,036
  2,153
  2,277
  2,408
  2,546
  2,692
  2,845
  3,007
  3,177
Retained Cash Flow (-), $m
  -146
  -154
  -164
  -175
  -186
  -197
  -208
  -221
  -233
  -246
  -260
  -274
  -289
  -305
  -321
  -338
  -356
  -374
  -394
  -414
  -436
  -458
  -482
  -506
  -532
  -559
  -588
  -618
  -649
  -682
Prev. year cash balance distribution, $m
  463
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  977
  537
  562
  590
  619
  651
  686
  724
  764
  807
  835
  884
  936
  992
  1,051
  1,113
  1,180
  1,251
  1,326
  1,405
  1,489
  1,578
  1,672
  1,771
  1,876
  1,987
  2,104
  2,227
  2,357
  2,495
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  936
  492
  489
  485
  480
  473
  464
  452
  439
  423
  396
  377
  356
  333
  308
  283
  257
  230
  204
  179
  154
  131
  110
  90
  73
  58
  45
  34
  26
  19
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Garmin Ltd. (Garmin) and subsidiaries offer global positioning system (GPS) navigation and wireless devices and applications. The Company operates through five segments. It offers a range of auto navigation products, as well as a range of products and applications designed for the mobile GPS market. It offers products to consumers around the world, including Outdoor Handhelds, Wearable Devices, Golf Devices, and Dog Tracking and Training/Pet Obedience Devices. It offers a range of products designed for use in fitness and activity tracking. Garmin offers a range of products designed for use in fitness and activity tracking. Its aviation business segment is a provider of solutions to aircraft manufacturers, existing aircraft owners and operators, as well as military and government customers and serves a range of aircraft, including transport aircraft, business aviation, general aviation, experimental/light sport, helicopters, optionally piloted vehicles and unmanned aerial vehicles.

FINANCIAL RATIOS  of  Garmin Ltd. (GRMN)

Valuation Ratios
P/E Ratio 30.8
Price to Sales 5.2
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 22.3
Price to Free Cash Flow 25.9
Growth Rates
Sales Growth Rate 7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 15.5%
Cap. Spend. - 3 Yr. Gr. Rate 11.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 11.3%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 15.1%
Ret/ On T. Cap. - 3 Yr. Avg. 13%
Return On Equity 15.1%
Return On Equity - 3 Yr. Avg. 13%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 55.6%
Gross Margin - 3 Yr. Avg. 55.4%
EBITDA Margin 23.7%
EBITDA Margin - 3 Yr. Avg. 24.8%
Operating Margin 20.7%
Oper. Margin - 3 Yr. Avg. 21.4%
Pre-Tax Margin 20.9%
Pre-Tax Margin - 3 Yr. Avg. 22.1%
Net Profit Margin 16.9%
Net Profit Margin - 3 Yr. Avg. 15.3%
Effective Tax Rate 18.9%
Eff/ Tax Rate - 3 Yr. Avg. 29.4%
Payout Ratio 94.1%

GRMN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GRMN stock intrinsic value calculation we used $3347 million for the last fiscal year's total revenue generated by Garmin Ltd.. The default revenue input number comes from 0001 income statement of Garmin Ltd.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GRMN stock valuation model: a) initial revenue growth rate of 3.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GRMN is calculated based on our internal credit rating of Garmin Ltd., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Garmin Ltd..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GRMN stock the variable cost ratio is equal to 58.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $636 million in the base year in the intrinsic value calculation for GRMN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Garmin Ltd..

Corporate tax rate of 27% is the nominal tax rate for Garmin Ltd.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GRMN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GRMN are equal to 25%.

Life of production assets of 10.8 years is the average useful life of capital assets used in Garmin Ltd. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GRMN is equal to 10.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4162.974 million for Garmin Ltd. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 189.429 million for Garmin Ltd. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Garmin Ltd. at the current share price and the inputted number of shares is $15.8 billion.

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