If an earnings report drops in the forest, and there's no one around to hear, does it make a sound? It's a question I bet a lot of Garmin
But maybe they should have, because news isn't the only thing dropping at Garmin. The company closed out 2010 with a 21% decline in sales and a near-50% drop in profits, putting a cap on a year of 9% sales declines and a 16% slide in profits. So while the stock certainly looks cheap enough at less than nine times free cash flow, the real question isn't whether Garmin is making money today, but whether it's going to be around to make any money for investors tomorrow.
So far, Wall Street thinks it will be. 2010's abysmal results notwithstanding, the dozen or so analysts who still follow this stock still believe Garmin will manage to grow earnings at close to 9% per year over the next five years. Me, I'm not so sure.
Wall Street looks lost
Consider: The biggest names in mobile devices today are Apple
Sure, Garmin still has automotive partners like Ford
Fools, a company doesn't attract 19% short interest by accident. Management itself forecasts no improvement in gross margins for 2011, and perhaps a 10% decline in revenues. So yes, Garmin looks pretty profitable for the price today. But unless it figures out a way to overcome the challenge of competing against "free," that won't be true forever.
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