Garmin Ltd. (NYSE:GRMN) is filed away in most investors’ heads as the company that used to make running watches, before Apple came along and took the category. That is the received wisdom, and the numbers say the opposite.
The shares closed at $295.05 on September 24, up close to a quarter this year. Revenue grew about 14% over the past twelve months, and profit grew nearly 20%.
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Garmin Won the Fight Everyone Assumed it Lost:
Fitness grew about 25% last quarter, faster than anything else Garmin owns. It also earns the fattest margin in the company, better than thirty-five cents of operating profit on the dollar, and it now produces more operating profit than the aviation and marine divisions put together.
That is not what a commoditised business looks like. Garmin kept the runners, the cyclists and anyone who wants a week of battery life rather than a day, and it kept them at full price.
The rest of the company is mostly good too. Aviation and marine both earn close to thirty cents on the dollar, and both are hard to displace. Cockpit avionics must be certified by regulators, and once a manufacturer designs your screens into an aircraft, they tend to stay there for years.
Marine behaves the same way. Garmin recently introduced an autopilot system for sailboats, part of a pattern of pushing into the higher value end of the boat rather than fighting over handheld units.
The one weak spot is the small automotive parts business Garmin supplies to carmakers, which barely breaks even. Everything else earns close to thirty cents on the dollar or better.
The balance sheet is close to pristine. Garmin carries almost no debt against several billion dollars of net cash, and pays a dividend yielding close to 1.5%.
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The Market Has Noticed, and the Cheap Part is Gone:
The obvious objection is the price. Garmin trades near thirty times earnings, and its forward multiple is barely lower, which means very little earnings growth is expected to come through next year.
Analysts have largely stopped recommending it. The consensus rating is a hold, and the stock has now climbed past the average price target. Nobody covering it sees much room left.
That is the disagreement worth naming. Garmin has been growing profit near 20%, and the market is pricing in almost none of that continuing. Either the forecasts are too cautious, or the growth is about to stop.
Hedge funds have been leaving too. The number holding the stock fell sharply in the latest quarter, from the mid-fifties to the high thirties, which is a heavier exit than the falling value of their positions suggests.
There is a cyclical worry underneath. Aviation and marine depend on wealthy buyers, and boats and light aircraft are among the first purchases deferred when confidence turns. A regulated moat protects pricing, not volume.
And the growth engine is the exposed one. There is also a concentration worry hiding inside the good news. The largest and most profitable part of Garmin is the one facing Apple and Samsung, and it has no regulatory moat protecting it. A single strong product cycle from either of them would land on the division carrying the company.
Conclusion:
Garmin is a better business than its reputation. The wearables everyone assumed Apple had taken are growing at a quarter a year, at the highest margin in the company, and they out-earn aviation and marine combined. Garmin pays a dividend, holds net cash, and is compounding profit near 20%. However, it trades around thirty times earnings with analysts seeing almost no upside and hedge funds heading for the exit. The number to watch is the fitness margin when Garmin reports on October 28. That division now carries the valuation.
Market Sentiment:
Garmin Ltd. was held by 37 hedge funds with a combined stake value of about $1.1 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 56 hedge fund holders with a cumulative investment value of around $1.2 billion in the previous quarter.
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This article is originally published at Insider Monkey.
