Consumer technology company Garmin (GRMN) has generated returns of 49% in the last 12 months. The stock easily outperformed broader markets last year and gained just over 6%. Since the start of 2019, the stock is up by 41%. Garmin stock has generated returns of 108% in the last three years and is up just 59% in the last five years. These returns were driven by the company’s robust revenue growth.
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Its earnings rose at a compound annual growth rate of just 5.9% in the last five years. While the company’s sales had risen from $2.6 billion in 2013 to $3.3 billion in 2018, sales are estimated to reach $3.86 billion by fiscal 2021.
Garmin stock is currently trading 1.2% below its 52-week high of $88.66 and 56% above its 52-week low of $57.01. With an RSI (relative strength index) score of 69, Garmin stock is trading close to overbought territory.
Is Garmin stock overvalued?
Garmin stock is expected to grow by single digits over the next few years. However, the company has a high forward 2019 PE ratio of 23.9x. For 2020, this ratio is 22.4x. Analysts expect Garmin stock to rise by 5.1% in fiscal 2019 and by 4.4% in 2020. Its EPS are expected to rise by 1.6% in 2019 and by 5.3% in 2021.
Its EPS are estimated to grow at a CAGR of 5.9% over the next five years. The stock will seem overvalued even if it loses 50%. Garmin competes with tech giants such as Apple, Samsung (SSNLF), and China’s (FXI) Huawei and Xiaomi in the wearable space.
The company might find it difficult to gain market share in wearables with the big companies pouring in millions into R&D and marketing efforts.
Of the 15 analysts covering Garmin, two have given it “buy” recommendations, ten have given it “holds,” and three have given it “sells.” The average 12-month target price for Garmin is $76, which indicates a potential downside of 14% from its current level.