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Trimble Navigation Limited (TRMB): Is This Technology Solutions Company a Good Turnaround Play?

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Since the bottom of 2009, Trimble Navigation Limited (NASDAQ:TRMB) has advanced consistently, from around $7 per share in March 2009 to nearly $28 per share recently. Interestingly, since the beginning of the year, Trimble has declined more than 6%, lagging the S&P 500’s return of nearly 16.4%. In the first quarter of 2013, small-cap guru Chuck Royce and Ruane Cunniff kept adding Trimble Navigation to their portfolios. Is Trimble Navigation a good investment opportunity at its current price? Let’s find out.

A good quarter but negative tangible book value

Trimble Navigation Limited (NASDAQ:TRMB) is a technology solutions company providing Global Positioning System (GPS) and Global Navigation Satellite Systems (GNSS) to various industries, including architecture, agriculture, construction, and natural resources. The majority of its operating income, $207.2 million, or 47% of the total 2012 income, was generated from the Engineering & Construction segment. The Field Solutions segment ranked second with $182.13 million in operating profit, while the Mobile Solutions and the Advanced Devices segment contributed only $32.46 million and $19.17 million, respectively, in 2012 operating income.

The company has quite a conservative capital structure. As of March 2013, it had $1.95 billion in equity, $144 million in cash, and $920 million in both long and short-term debt. However, what makes me worried is its high goodwill and intangible assets of as much as $2.48 billion. Thus, the tangible book value was negative at $530 million.

In the first quarter of 2013, its operating income experienced a slight decrease from $59.85 million last year to $56.46 million this year. Net income came in at $49.8 million, or $0.19 per share, a bit lower than net income of $50.8 million, or $0.20 per share, in the first quarter last year. For the second quarter, Trimble Navigation Limited (NASDAQ:TRMB) expects to generate around $570 to $580 million in revenue and around $0.18 to $0.20 in GAAP EPS.

President and CEO, Steven Berglund said that he was “cautious about second quarter prospects,” but “anticipate improved organic growth in the second half of 2013.” At $28.10 per share, Trimble Navigation Limited (NASDAQ:TRMB) is worth around $7.2 billion on the market. The market values Trimble at 16 times its forward earnings.

Are Garmin (NASDAQ:GRMN) and Fleetmatics better buys?

Compared to peers Garmin Ltd. (NASDAQ:GRMN) and FleetMatics Group PLC (NYSE:FLTX), Trimble Navigation Limited (NASDAQ:TRMB) is the biggest company among the three. Garmin, at $35.50 per share, is worth nearly $7 billion on the market. The market values Garmin a bit cheaper at 14.9 times its forward earnings. Garmin has kept innovating with new products. Recently, the company launched a new portable navigation device for MINI vehicles. For a better and more integrated design, all cables would be hidden behind the dashboard. Garmin Ltd. (NASDAQ:GRMN)’s managing director of automotive OEM, Matt Munn, said that with new Real Directions and Active Lane Guidance features, this new Garmin device allows drivers to follow directions in a much easier way.

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