Garmin (GRMN +0.85%) may be a household name among boaters, runners, hunters, and other outdoor recreation enthusiasts, but it seems to fly under the radar with investing pundits. Yet Garmin's stock has performed much better than the S&P 500 index over the last three years.
That's even after Garmin shares slid 13.1% in October, according to data provided by S&P Global Market Intelligence. Garmin's total return (including dividends) of 150% in three years handily beats the 87.5% from the widely followed index.
Garmin shares continued to sink into early November, and a 20% correction off its all-time high price of about $260 per share now gives investors a good opportunity to participate in the GPS technology company's future growth.
Image source: Garmin.
Cash is king, especially in tough times
Garmin stock has performed well as consumers continue to buy its innovative GPS devices. Revenue grew 20% last year, and that momentum has continued into 2025. Sales have increased another 14.4% year over year in the nine months through September.
Those sales bring the asset-light company a lot of cash. Free cash flow of $425 million in the third quarter far exceeded the company's $173 million quarterly dividend payment. While Garmin stock does offer a modest 1.6% dividend yield, management retains a rock-solid balance sheet for times when sales growth slows.
That has allowed the company to make acquisitions that help keep its technological lead as well as bring a significant number of its distributors under its wing over the years. The $3.9 billion in cash and marketable securities it held as of the end of Q3 represents 10% of Garmin's recent market cap.
NYSE: GRMN
Key Data Points
Apple is another big cash generator in the market. Investors might want to compare the price-to-cash-flow ratios of the two companies. Garmin's valuation looks attractive with that ratio under 30 compared to over 40 for Apple.
That valuation improved last month as the stock sold off after hitting an all-time high in early October. Garmin's Q3 report was also strong, but investors sold the news there, too. A 12% year-over-year revenue increase represented a growth slowdown versus the most recent quarters.
Investors who want a long-term position should be happy with the pullback, though. Garmin can use its fortress balance sheet to improve its market position or technological lead if consumer spending slows. Even if sales decline due to the economy going into a recession, Garmin would come out the other side a stronger company. That's the kind of company many investors should want to have in their portfolios.
