Garmin (NASDAQ:GRMN) stock has been a winner for investors, not only through the pandemic but over the longer term as well. The navigation-device maker has demonstrated a knack for growing sales and profit margins through a wide range of selling conditions -- primarily thanks to a steady drumbeat of hit product releases in areas as diverse as smartwatches and aviation GPS.

The company kept the good times rolling into early 2021 with a first-quarter report that showed robust growth in most of its categories -- including automotive. Let's look at the biggest takeaways from that financial update, which CEO Clifton Pemble and his team discussed in a conference call with analysts.

A hiker checks her sports watch.

Image source: Getty Images.

A solid start

"We're very pleased with what we've accomplished so far this year, and we continue to see strong demand for our products," Pemble said.

Garmin's 25% Q1 sales increase easily beat expectations, with strength showing up in fitness trackers, smartwatches, boating, and automotive. The company is having no trouble launching in-demand products, whether it's chart plotters for marine enthusiasts or watches targeted toward endurance runners.

The only weak spot was the aviation segment, which is still recovering from the pandemic's impact. Yet there was good news in that niche, too, as sales declines slowed to almost zero, suggesting an end to the slump.

Cash and profits

"We generated free cash flow of $331 million, [a] $147 million increase from the prior quarter," according to CFO Douglas Boessen.

Garmin's finances shined in Q1. Gross profit margin increased despite weakness in aviation, the company's most profitable segment. Operating margin rose, too, thanks to restrained advertising spending. These trends allowed adjusted earnings to jump 30%.

Free cash flow hit a quarterly record of $331 million and should remain strong for the rest of the year, even though executives are planning to ramp up spending in a few areas over the next several quarters. That success likely means investors will see more cash returns from dividends and stock repurchases.

Why the outlook didn't budge

"With these things in mind, we are maintaining the guidance issued on February 17," Pemble added.

Investors were probably disappointed when Garmin left its 2021 outlook unchanged after posting a surprisingly strong first quarter. Management said the caution was driven by the fact that Q1 usually represents a relatively small portion of annual sales, and so it's still too early to be confident about wider demand trends. Second, the company is just starting to be affected by supply shortages and mounting shipping challenges, which could combine to hurt sales in the second half of the year.

The good news is that these problems haven't knocked Garmin off of its incredible five-year growth run, and it's also possible that sales gains will stay strong from here. People are eagerly spending on products that help them spend more time outdoors, and that's great news for the leading GPS device producer in premium niches like boating, aviation, and outdoor smartwatches.

"We do believe that the kind of lifestyle changes that we've seen as part of the pandemic are durable," Pemble said, "because people have made significant investments [that] helped their ability to be outdoors and have recreation." This bigger picture makes Garmin an attractive stock despite the short-term risks around consumer-demand and supply challenges.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.