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

FleetMatics Group PLC (NYSE:FLTX) is one of the main competitors of Trimble Navigation Limited (NASDAQ:TRMB) in the Mobile Solutions segment. Fleetmatics provides fleet management solutions to around 331,000 vehicles and around 18,000 customers around the world. In the past three years, its subscription revenue has grown significantly, from $64.69 million in 2010 to nearly $127.5 million in 2012. Net income has also improved substantially, from a loss of $736,000 to a profit of more than $5.4 million.

Recently, Virgin Media Inc. (NASDAQ:VMED) chose SageQuest, one of its enterprise fleet management solutions, for 2,600 vehicles in Britain to help the company improve Virgin Media’s environmental performance, including reducing fuel usage, increasing safety levels, and enhancing customer service level. Because of its high growth, Fleetmatics has quite a high valuation. At $30 per share, Fleetmatics is worth nearly $1 billion. The market values Fleetmatics at as high as 31.7 times its forward earnings.

My Foolish take

According to Barron’s, Dougherty & Co estimated that Trimble Navigation Limited (NASDAQ:TRMB) might earn around $1.74 per share in 2014. With a P/E of 20, the stock might be worth $35 per share in around a year. Indeed, customers have been saving costs and improving productivity with the help of Trimble’s products. It is a decent business, however, with a negative book value and double-digit forward earnings valuation, I do not think Trimble offers enough margin of safety for investors at its current price. I would prefer a much lower valuation before initiating a long position.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is This Technology Solutions Company a Good Turnaround Play? originally appeared on Fool.com and is written by Anh HOANG.

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