Garmin Ltd. (NYSE:GRMN) Passes Key Quality Investing Screen

For investors aiming to assemble a portfolio of lasting, high-performing businesses, the quality investing philosophy offers a useful framework. This method centers on finding companies with durable competitive strengths, sound financial condition, and reliable earnings, with the plan of owning them for many years. One organized way to find these companies is through a stock screener based on measurable quality factors, such as the "Caviar Cruise" screen. This process selects for firms displaying solid revenue and profit expansion, high returns on invested capital, good cash flow conversion, and low debt, all signs of a durable business.

A recent search using this quality-oriented screen pointed to Garmin Ltd. (NYSE:GRMN) as a possible candidate. The worldwide leader in GPS navigation and wearable technology seems to fit many important standards that quality investors look for.

Fitting the Central Quality Standards

The Caviar Cruise screen uses a set of strict filters to separate companies with better business foundations. Garmin’s financial picture matches these needs closely:

• Lasting Expansion: The screen calls for at least a 5% compound annual growth rate (CAGR) for both revenue and EBIT (earnings before interest and taxes) over five years. Garmin exceeds this easily, with a 5-year revenue CAGR of 8.92% and an EBIT CAGR of 11.01%. Importantly, its EBIT expansion is faster than its revenue growth, a sign of better operational efficiency and possible pricing strength, exactly the trend quality investors want.

• Outstanding Capital Use: A key part of quality investing is a high return on invested capital (ROIC), which shows how well a company produces profits from its capital. The screen needs an ROIC (leaving out cash, goodwill, and intangibles) over 15%. Garmin performs well here with a number of 28.10%, showing it creates significant value from each dollar put into its business.

• Careful Financial Stewardship: The strategy looks at debt sustainability by comparing total debt to free cash flow, favoring a ratio under 5. Garmin is notable with a Debt/FCF ratio of 0.0, since it functions with no interest-bearing debt. This very strong balance sheet offers great financial room and durability in economic slowdowns.

• Superior Earnings Quality: Earnings quality, calculated as the 5-year average of free cash flow to net income, must be more than 75%. This makes sure reported profits become real, usable cash. Garmin’s average of 79.10% meets this mark, verifying that its earnings are supported by good cash generation.

A Look at Garmin's Foundational Condition

A wider look at Garmin’s fundamentals supports the picture from the screen. The company’s complete financial profile is marked by very good strength in earnings and financial condition, although it sells at a price that acknowledges its quality.

• Earnings Strength: Garmin’s margins lead its industry. It has a gross margin close to 59%, an operating margin over 25%, and a profit margin above 22%, each placing in the best part of its group. Its return on equity of 18.53% further indicates efficient management.

• Very Strong Financial Condition: With no debt, high liquidity (Current Ratio of 3.32), and an excellent Altman-Z score of 14.01, Garmin’s financial standing is very safe. This condition rating is with the best available, greatly lowering bankruptcy risk.

• Stable Growth Path: The company has shown good past growth in both revenue and earnings per share. Analysts think this pace will keep going, with estimated future yearly growth rates near 9% for revenue and EPS, showing the business is still progressing.

• Price Note: The main point of care is its price. With a P/E ratio near 24.8, Garmin is priced higher than many industry peers. Still, quality investors frequently pay higher prices for companies showing better and steady financial traits, as Garmin does.

For a complete look at these measures, you can see the full fundamental analysis report for GRMN.

Final Thoughts

Garmin Ltd. shows a strong profile for investors following quality ideas. It displays the desired mix of steady growth, high profitability, excellent capital use, and very clean financial condition. The company’s various parts—from outdoor and fitness wearables to aviation and marine electronics—offer balance and several paths for growth. While its price is not low, it mirrors the higher value the market gives to a well-managed, debt-free company with lasting competitive strengths.

The Caviar Cruise screen is made to find companies with these lasting traits. Garmin’s success with its filters suggests it deserves more study by investors looking for high-quality long-term holdings.

Find Other Quality Ideas: The Caviar Cruise screen can help find other companies with similar solid foundations. You can view the present screen results and change the settings yourself using the Caviar Cruise stock screener.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.