Garmin Ltd (NYSE:GRMN) Identified as a High-Quality Stock by Caviar Cruise Screening Method

Garmin Ltd (NYSE:GRMN) has been identified by the Caviar Cruise stock screening method, a system made to find high-quality companies with lasting competitive benefits, sound financial condition, and steady expansion. This process, based on the ideas of quality investing, focuses on long-term ownership of businesses that show better operational results, strong profitability, and careful capital use. The screen assesses a number of quantitative measures to find companies that not only show past high performance but also hold the capacity for continued future achievement.

Financial Performance and Growth

Garmin’s past results fit well with the main parts of the Caviar Cruise method, which looks for companies with significant sales and profit increases. Over the last five years, Garmin has achieved:

• A revenue compound annual growth rate (CAGR) of 9.05%, well above the screen’s 5% minimum.
• An EBIT CAGR of 11.01%, also above the minimum need of 5%.

Furthermore, the company’s EBIT growth has been higher than its revenue growth, pointing to better operational effectiveness and possible scale benefits. This is an important sign of quality, as it implies the company is not just getting bigger but also more profitable as it grows, a signal of pricing strength and good management.

Profitability and Capital Effectiveness

A key part of quality investing is the good use of capital, and Garmin is very good in this area. The company’s return on invested capital excluding cash, goodwill, and intangibles (ROICexgc) is at a notable 29.18%, much higher than the screen’s 15% standard. This measure is important because it shows how well a company creates returns from the capital put into its main operations. A high ROIC is frequently a sign of a lasting competitive benefit and better management performance.

Also, Garmin’s profit quality—measured as the five-year average free cash flow to net income ratio—is 79.1%, above the 75% minimum. This shows the company regularly turns accounting profits into real cash, supporting the durability of its earnings. Sound cash flow creation not only helps current operations but also allows for planned investments, dividends, or share buybacks.

Financial Condition and Balance Sheet Soundness

Garmin’s balance sheet is particularly strong, with no debt—leading to a Debt-to-Free Cash Flow ratio of 0. This is a very good feature, as it removes interest cost risk and offers major financial stability. Within quality investing, a sound balance sheet makes sure the company can handle economic declines, put money into future expansion without too much borrowing, and give capital back to shareholders regularly.

The company also shows good liquidity, with a current ratio of 3.01 and a quick ratio of 2.09, pointing to a strong ability to cover near-term responsibilities. This type of financial steadiness is a key feature of quality businesses and lowers investment risk.

Summary of Fundamental Analysis

Garmin’s fundamental picture, as described in its full report, shows a company with exceptional profitability and very good financial condition. It gets a fundamental rating of 7 out of 10, with very high marks in profitability (8/10) and financial condition (9/10). The company’s margins are top in the industry, and its expansion—though slowing a bit—stays good. The primary weakness is its price, which seems high compared to industry rivals. However, for quality investors, paying more for a better business is frequently acceptable if the company’s fundamentals stay sound.

Conclusion

Garmin is a strong candidate for quality investors looking for a well-run, financially secure business with a record of expansion and high returns on capital. Its fit with the Caviar Cruise requirements highlights its operational high performance and durability. While its price may cause some investors to hesitate, the company’s fundamental benefits make it worth looking at for long-term portfolios.

For those wanting to review other companies that fit similar quality investing requirements, more screening outcomes are available here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consider their financial situation and risk tolerance before making investment decisions.