Garmin (GRMN -1.03%) has problems that most electronics makers would kill for. The tech producer said last week that sales grew in the third quarter, even compared to booming demand a year earlier. Management also lifted its growth and profit margin forecasts, even though costs are soaring and inventory is getting harder to stock.

Let's look at a few reasons why Garmin's latest results were great news for the business.

A hiker checks their smartwatch.

Image source: Getty Images.

Market-share momentum

Garmin added $70 million, or 7%, to its Q3 sales base. Sure, that was a slowdown compared to last-quarter's 53% surge, but it still marked solid growth and strong demand across the portfolio.

The outdoor segment, home to Garmin's wide range of smartwatches, is up 26% through the first three quarters of the year, despite taking a small step backwards in Q3. Overall sales are up 27% so far this year, at $3.6 billion.

"I am very pleased with our performance," CEO Cliff Pemble said in a press release, "as we are now comparing against the robust pandemic-driven growth from the prior year."

Margin wins

Garmin said in an investor presentation that it wasn't immune to the supply-chain and cost issues that impact most manufacturers today. Operating margin fell by nearly 5 full percentage points to 23% of sales. And non-GAAP earnings fell 11%, year over year. Garmin spent more on transportation and manufacturing, but also shelled out more cash in research and development, and advertising.

These moves helped push profitability lower despite the growing sales base and a continued demand tilt toward premium products in its lineup. They also erased some of the benefit from the booming aviation business. That niche carries some of Garmin's highest profit margin and grew 19% in the quarter. "Strong demand for active lifestyle products continued," Pemble said.

Sales growth is still accelerating

The stock fell immediately following the report, likely because Wall Street was hoping for a more aggressive outlook on the holiday season. But Garmin's updated forecast amounts to a stellar year for the business.

Sales are now on track to rise to $4.95 billion, or more than 17%, following last-year's 12% jump. That prediction implies rising sales in each of its divisions, including a 30% spike in the marine-navigation segment and 17% higher revenue in the wearable-fitness niche.

The earnings outlook got an upgrade, too, despite mounting cost challenges. And Garmin now believes operating margin will land at 24% of sales, compared to the prior target of 23.8% of sales.

Sure, its holiday-season outlook implies its slowest growth of the year. Management also said in a conference call with Wall Street analysts that they like their inventory position heading into that peak selling period.

In other words, Garmin is on track to accelerate sales growth for a second-straight year -- on top of big gains in 2020. Annual revenue might even pass $5 billion in 2021.

Profit margins aren't climbing much higher right now, which is no surprise, given the tough cost environment. But Garmin should see a nice rebound in that metric and in earnings growth, beginning in 2022. Those are just a few more reasons that the stock is a buy for investors seeking exposure to attractive niches like wearable tech.