Please ensure Javascript is enabled for purposes of website accessibility

Why Garmin Ltd. Shares Plunged in 2015

By Travis Hoium - Jan 8, 2016 at 3:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Sales are dropping at Garmin, but there's more to the story for this emerging fitness company.

What: Shares of GPS company Garmin Ltd. (GRMN 0.93%) fell 29.6% last year, according to S&P Capital IQ data, as the company transitions from GPS navigation for vehicles to personal electronics devices.

So what: Last year was a transformational year for Garmin and, on the surface, it didn't look like a good year for the company. You can see in the chart below that revenue declined in the second half of the year. That gives investors pause about what growth might look like in the future.

GRMN Revenue (TTM) Chart

GRMN Revenue (TTM) data by YCharts.

Hidden within those numbers is a strong fitness segment that creates high-end watches and GPS devices for athletes. Fitness revenue grew 23% in the third quarter while auto products fell 14%, outdoor fell 5%, and aviation fell 5%. It's easy to understand why the auto business is in broad decline, as smartphones are taking the place of in-car navigation systems, but investors are nevertheless worried about how fast fitness will fill the void.  

Now what: As someone who owns a Garmin watch and an Apple Watch, I can tell you that Garmin has a dominant position in the niche high-end sports market. An Apple Watch isn't anywhere close to being a device you would wear for a triathlon or as a golf-tracking device. Garmin fills that niche; for users it's an indispensable training tool. With the growth in fitness and Garmin's established position, I think the company has a bright future. For investors, shares trading at 12 times training earnings and paying a 5.5% dividend yield make this an attractive stock for 2016.

Travis Hoium owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Garmin Ltd. Stock Quote
Garmin Ltd.
GRMN
$98.51 (0.93%) $0.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.