The Garmin Ltd. (NASDAQ:GRMN) investors have had a good and healthy fiscal 2014. The shares have outperformed the market by increasing over 21%. The company’s core segments, GPS, reduced in size while other segments grew. The shareholders have been kept content because of the high demands of the wearable, fitness gadgets by Garmin Ltd. (NASDAQ:GRMN).
Investors are now wondering if it is too late to buy Garmin Ltd. (NASDAQ:GRMN)’s stock now? There are several reasons, apart from the performance in the current fiscal, for investors to like the company. But, the competition is now intensifying.
Garmin Ltd. (NASDAQ:GRMN) is not cheap neither is it too expensive. The price-to-earnings value of the company is around 18 presently. This is in line with the market. This is quite unusual for a company whose core business is declining. The company, Garmin Ltd. (NASDAQ:GRMN), has five different segments. The largest segment is the personal navigator. The GPS sales contribute over 43% to the company’s revenue and over 35% to the gross profit. However, sales have been declining because of the growing market for smartphones and other smart devices that incorporate the functionalities of GPS. In the last quarter, the company’s GPS business fell by 5%.
This is not weighing too heavily on Garmin Ltd. (NASDAQ:GRMN) because other business segments of the company are performing well. The wearable gadgets, in particular, are seeing high sales and demand. Recently, the Vivosmart was released, after which the sales increased by 43%. The wearable devices of Garmin Ltd. (NASDAQ:GRMN) have several advantages when compared to the iWatch by Apple Inc. (NASDAQ:AAPL). However, the wearable gadget segment faces competition from other companies.
Ever since iPhone was introduced into the market, Garmin Ltd. (NASDAQ:GRMN) has believed that its future is dark. All kinds of smartphones now incorporate navigation software, which puts a question mark on Garmin Ltd. (NASDAQ:GRMN)’s GPS segment. However, Garmin Ltd. (NASDAQ:GRMN) did not give up. The company has managed to generate a lot of cash, most of which has been returned to the shareholders.
The wearable devices by Garmin Ltd. (NASDAQ:GRMN) could easily maintain rapid growth rates. However, currently, the company’s largest, potential competitor could be the iWatch. Other tech giants have also shown interest in the wearable devices market.
The GPS segment of Garmin Ltd. (NASDAQ:GRMN) has only declined modestly annually. However, the future looks tough for the company as, in the beginning of next year, many new vehicles will be launched that will use a smart, software navigation system. The software are developed by Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL).
Garmin Ltd. (NASDAQ:GRMN) could potentially defy all competition and continue to reward the shareholders. The new devices in the market, such as the iWatch, still have to prove themselves. Meanwhile, the Garmin Ltd. (NASDAQ:GRMN)’s wearable devices are in demand. But, the prospect does not look good for the company. The investors must strongly consider before making an investment in Garmin Ltd. (NASDAQ:GRMN).