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Garmin (GRMN)
Recommendation: Buy Industry: Communication Equipment Recent Price $59.37 Analyst: Jennifer Traynor Target Price $60.76 Report Date: 5/2/2007

Highlights • Large-cap growth stock with a market cap of $11.68 billion. • Garmin has the number one GPS market share of 50% in the U.S. and the number two GPS market share in Europe of 16.7% • Consumer demand for GPS products will continue to increase as technology improves and produces new and innovative products. • High historical ROIC, ranging from 39.4% to 47%, which is significantly higher than its 11% WACC. • Garmin’s revenue is likely to grow 35% per year for the next five years. • Target price of $60.76, is based on a P/E multiple valuation using a P/E of 19.6. • The major risks that could cause Garmin not continue on it positive trajectory are: decreasing profit margin, sustainable revenue growth and increasing competition. Key Statistics and Ratios Garmin has been consistently outperforming the communication equipment industry and the S&P 500 in ROA, ROE, sales growth, gross margin, and net profit margin in the past five years. Ratios ROE - 5Yr. Avg. ROA - 5Yr. Avg. Sales - 5Yr. Growth Rate Gross Margin - 5Yr. Avg. Net Profit Margin - 5Yr. Avg. P/E Ratio EPS - 5Yr. Growth Rate Dividend Yield - 5Yr. Avg. Garmin 30.38% 25.71% 35.04% 52.46% 29.39 23.06 35.04% 0.01% Industry 6.00% 2.99% 19.82% 45.71% 4.59 25.25 37.33% 0.41% S&P 500 18.21% 6.84% 13.29% 44.32% 12.31 20.65 22.21% 1.85%

Company Overview Garmin Ltd. designs, manufactures and markets portable, fix-mount and hand held Global Positioning Systems (GPS) devices. The company’s stock is currently trading on the NASDAQ. It operates in four segments: mobile/automotive, marine, aviation, and

recreational. Products include automotive navigation systems with map information, GPS enabled sonar depth finders for recreational boating and fishing, aviation systems, and GPS enabled cellular phone software. Garmin has the number one GPS market share of 50% in the U.S and the number two GPS market share of 16.7% in Europe and is currently attempting to increase their market share in Asia by opening two manufacturing plants, both over 230,000 square feet. Garmin products sell in approximately 100 countries and are distributed through a network of about three thousand independent dealers. According to an S&P 500 report, Garmin’s top management believes that its marine, automotive, recreational, and aviation product lines will continue to drive their sales and revenue in the future. Garmin has partnered with companies such as Honda, XM Satellite Radio, and MSN Direct to offer innovative and competitive products. In November 2006, Garmin acquired Dynastream Innovations, a Canadian company specializing in the field of personal monitoring technology. In January, Garmin acquired Digital Cyclone, Inc., which provides personalized weather intelligence for wireless devices, and EME TecSat, which is a third-party map developing company that uses Garmin’s technology. Also, Garmin recently announced that it will be sponsoring a NASCAR team, has made agreements with many rental car companies to use Garmin products, entered into an agreement with Honda Europe to begin using Garmin products, and aired its first ever Super Bowl commercial this year. Industry Analysis The demand for consumer electronics is going to be driven by advances in GPS technology. According to research report released April 9 by the Consumer Electronics Association, consumer interest in GPS technology is increasing dramatically. Consumers are wanting the latest and greatest technology that is available. As GPS technology improves each year, providing new and improved products, consumers are going to be demanding these products. GPS devices will continue to gain popularity as old technologies fade and new technologies enter the market. The CEA report also states that only 18 percent of online consumers own GPS devices. However, nearly 24 percent of...
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